Around 62 per cent of DB schemes are now expecting to be fully funded for buyout within the next 3 years, according to XPS Pensions.
An XPS Pensions Group survey of over 300 trustees and employers conducted at a recent XPS Live event, “Delivering the Endgame for your Scheme” found that demand for buyouts is likely to increase given UK pension schemes’ funding position.
According to XPS’s DB: UK tracker, UK DB pension schemes are now approximately 95% funded on a buyout basis, up from 69% at the beginning of 2022, which has sparked record activity in the bulk annuity market.
The bulk annuity market has had its biggest year-to-date start ever, according to XPS’s Bulk Annuity Tracker, which has already recorded £10bn in transactions.
XPS head of risk settlement Stephen Purves says: “The funding gains we have seen during 2022 have been locked into by lots of schemes via asset de-risking and we are seeing the demand for bulk annuities continuing to build significantly. As things stand, it’s clear that 2023 is already looking likely to be a record year.
“Currently the insurance market is coping with demand and pricing levels are still competitive, but as we progress through 2023, insurer capacity is likely to be stretched and insurers may become more and more selective.”