The UK defined benefit pensions de-risking market is projected to see £50bn in bulk annuity transactions and £20bn in longevity swaps in 2025, according to WTW’s De-risking Report.
This follows nearly £60bn of deals in 2024, thanks to strong funding positions and new insurers entering the market. While some well-funded schemes might delay buyouts to tap into surpluses, many are likely to use longevity swaps to keep risks in check.
Meanwhile, superfunds are also making waves with Clara Pensions already completing three deals, including one with an ongoing covenant. The report suggests that more schemes could be drawn to superfunds as they look for fresh ways to secure liabilities.
On the regulatory side, big changes are coming with the full rollout of Solvency UK reforms, and pricing and security in the bulk annuity and longevity swap markets could shift. The Prudential Regulation Authority is also closely monitoring the growing market, especially as large transactions become more common.
WTW pension transactions team managing director Shelly Beard says: “The relatively stable market conditions over 2024 combined with the rise in gilt yields over recent weeks has meant schemes’ funding levels have generally continued to improve. Further, more trustees and corporates have been actively focussing on dealing with their illiquid assets, drafting benefit specifications and cleaning up their data. Alongside this, insurer pricing has remained attractive for schemes of all sizes.
“All of this is culminating in more schemes being ready to approach the insurance market to undertake full scheme buy-ins, with the increase in demand expected to be met in part by the increase in participants in the market.
“Moreover, strong levels of longevity swap activity are also expected to continue. The proposed Mansion House Reforms have led to a number of pension schemes with strong sponsors taking a fresh look at their long long-term target and deciding that running on for longer may be the preferred way forward, with a longevity swap used as a means of mitigating a key remaining unrewarded risk.”
