The UK pension risk transfer (PRT) market experienced substantial change in 2025 with defined benefit (DB) scheme trustees, sponsors and insurers likely to feel developments over the past 12 months have improved their outlooks.
Schemes benefited from continued funding improvements and a favourable de-risking price regime despite bulk-purchase annuity (BPA) deal values dipping.
Sponsors may also be gleefully rubbing their hands at the prospect of greater opportunity to draw surpluses from their schemes as government policy looks set to favour more run-ons.
And insurers could harbour a sense of optimism as consolidation within the sector reduces competition.
While full-year transaction data has yet to be published by insurers or consultants, analysts think the market tempered in 2025 and failed to breach the £50bn mark that many had predicted. LCP, for instance, forecast the year saw between £40bn and £50bn in deals.
There are signs that a late-year surge kept totals above £40bn. Insurer M&G, for instance, said it completed 11 BPA transactions valued at £1.5bn last year, with the lion’s share of that total closing in the fourth quarter. The London-based insurer is now confident of reaching its £3bn-£4bn target by 2027.
Analysts are optimistic that the late-year boost will continue into 2026 and are predicting a record year. LCP forecasts that the full-year total will reach £55bn, while Hymans Robertson is even more bullish, predicting deals in excess of £60bn.
One reason for the decline in the past 12 months was the improvement in endgame options. In January, the government said it was looking at how sponsors could more easily extract surpluses from their schemes, giving them capital to reinvest in their companies or pass on to members. Those ambitions have been written into the Pension Schemes Bill, which is due to be enacted this year.
Consequent expectations that sponsors will eschew de-risking plans for run-ons became manifest later in the year when TPT Retirement Solutions announced it would launch a run-on superfund, enabling smaller schemes with weaker funding positions to pool their assets and provide them with greater investment clout.
With a greater choice of endgames now available, trustees are taking a wider look at their options, said Mark Austin, Pensions and Insurance Executive for EMEA at asset servicing provider Northern Trust.
“We think all of those things working together actually stopped the market from hitting that big figure,” said Austin.
“What we have seen has not slowed that market down, but given the market a bit of pause for thought and we think that that has in some ways not changed the market for good, but has certainly changed the dynamic.”
Trustees and sponsors can be choosier because many of them are flush with capital. Funding positions across the almost 5,000 existing DB schemes rose in 2025, with The Pension Protection Fund noting in its December update that the aggregate funding ratio had climbed to 129.9%, with 3,675 schemes holding almost £260bn in surpluses. That far outweighs the 1,294 underfunded schemes with total deficits of £19.3bn.
Schemes have benefited from rising stock prices, which sent the UK’s benchmark FTSE 100 Index to a record in mid-November, and improving gilt yields.
“A lot of our clients were in a better position at the end of the year than they were at the beginning of the year,” said Dean Wetton, Founder and Managing Director of London-based Dean Wetton Advisory.
“For some of our clients the market was so good, the equity market in particular… that’s closed some of their funding gap.”
Consolidation among insurers that buy risk from sponsors accelerated in 2025 with three mergers announced and due to complete this year.
In July, Athora announced it would acquire Pension Insurance Corporation (PIC) and at the end of the year, Utmost Group sold its BPA business to JAB Insurance. And the announcement of the acquisition of Just Group, which has been in the market since 2012, by Brookfield’s Blumont Annuity, the most recent insurer to enter the fray, will reduce the number of insurers to 10 from 11 and could constrain capacity, which some observers have said is showing signs of tightening.
“We were hoping to have more multiple deals because there was a wider choice of providers,” said Wetton.
“The constraint is not necessarily at the insurers themselves, but in the ancillary services to support them, to get them ready for deals,” he added.
While transaction values dipped, deal numbers rose in the first half by as much as 20% year-on-year as more smaller schemes sought buy-ins and buy-outs. Data collected by LCP found that 133 deals were struck in the first six months totalling a relatively small £9.7bn, leading the company to predict a total of 350 for the whole of the year. That’s in contrast to 2023 and 2024, when £5bn-plus deals were not uncommon.
The decline in £1bn-plus deals suggests that, with more than 2,000 schemes having de-risked in the past few years, there are simply not enough large schemes left to lift the market. As well, remaining large schemes still holding their liabilities may be prime candidates for run-ons because they tend to have greater financial firepower to absorb the costs of doing so.
“The bigger pension schemes obviously have got larger surpluses… there are quite significant fixed costs associated with all the legal matters, and so on,” said Austin.
“In those circumstances, the sponsors and the trustees can sit back and think about where they want to go with this now that that surplus option is on the table.”
Deals at the smaller end of the market may also have been hastened by growth in off-the-shelf, templated deals. Insurers and advisers have put together contracts that have brought a degree of standardisation to the de-risking process, enabling more deals to be transacted. Advisory firm Broadstone, for instance, said more than £1bn-worth of small-scheme deals had been transacted via its SM&RT Insure product, with the firm having advised on £508m of BPA business in 2025.
“It’s democratised the market, and I think it’s a good thing,” said Austin.