The UK’s bulk purchase annuity (BPA) market has been marked this year by the intensification of two developments that gained momentum in 2024: expansion in insurer capacity and further growth at the smaller end of the market.
After £47.8bn of deals were struck last year, some market participants have predicted an even greater aggregate size this year. It is too early to tell if expectations will become reality, partly because deals aren’t always publicised and estimates are partially drawn from contacts within the industry, but in terms of activity, as opposed to deal size, it has been a robust first half.
“Of course, the number of deals completed and announced does not fully capture the level of ongoing activity in the market, but from our perspective [that] is a lot, much busier than this time last year, when activity was very much weighted towards H2,” said Gemma Millington, Senior Director in WTW’s pensions de-risking team.
The market has been given a new dynamic by the entry of Blumont Annuity in March, making it the third new insurer to enter a market which is seeing growing demand from scheme trustees for BPAs in the past 12 months. There are now 11 companies competing for the potential business of about 5,000 defined benefit pensions schemes holding assets of around £1.2tn, according to the Pension Protection Fund’s Purple Book.
“I’ve spoken to some of the new entrants, and they’ve been really positive,” said Dean Wetton, Founder and Managing Director of Dean Wetton Advisory.
“It’s clear that they are new to the space, but I’ve not seen any fundamental problems.”
Blumont entered the market shortly after Utmost, which itself followed Royal London (which entered the market in September last year). Millington said that all the new entrants have completed their first deal and that the market was already benefiting from the increased capacity they bring.
“New entrants can offer schemes attractive pricing opportunities and personalised attention by virtue of not having the volume of schemes that more established participants might have,” she said.
Earlier this year, speakers at the Life ILS Conference 2025 in London forecast that the growth of insurer capacity would put downward pressure on pricing.
LCP data lends weight to that prediction, indicating that full buy-in prices – when expressed as the added return on a buy-in relative to holding UK sovereign bonds – were almost 0.3% in April, the last full month for which the company has data. That’s the highest level recorded outside of a period of crisis and compares with a 0.2% discount to gilts in early 2024, LCP’s report said.
While the blockbuster £5bn-plus deals that marked 2024 have yet to be reported in 2025, a number of larger transactions stand out.
In January, Sanofi Pension Scheme completed a £1.4bn buy-in with Legal & General covering 4,900 pensioners and 5,600 deferred lives. Meanwhile, Baker Hughes completed three buy-ins totalling £900m, covering benefits for around 3,000 pensioners and almost 4,000 deferred members.
While sub-£100m deals accounted for about 80% of the 293 transactions struck in 2024, Millington said that completions this year have been evenly spread across scheme sizes. Schemes below the £100m mark are getting good uptake thanks to an increase in capacity and the use of templated “off-the-shelf” contracts, she said.
“Whilst [it] may incur additional costs for the trustees to prepare template data and align with different insurers’ processes, the additional competitive tension that having more insurers involved in a process brings will likely more than offset these costs in terms of premium reduction achieved,” she said.
Wetton has noticed a bias towards smaller schemes.
“It appears that the smaller insurers – particularly the newer ones – don’t really want to [bid for bigger schemes initially] because their entire book would then be one client; they want to diversify their exposure,” he said.
Blumont’s arrival marked the continuation of American private capital involvement in the UK insurance market, with a very recent news item – the acquisition of Pension Insurance Corporation Group (PIC) by Apollo-backed Athora, a large savings and retirement group that has operated across Europe for many years – providing a continuation of that trend.
The deal, valued at £5.7bn, makes PIC the largest subsidiary within the Athora Group, bringing about £50bn in assets and almost 400,000 policyholders.
Unsurprisingly, the speed of growth in the UK market has attracted the attention of regulators and in April, Gareth Truran, Executive Director of Insurance Supervision at the Bank of England, signaled that the Prudential Regulation Authority (PRA) was continuing to take a serious look at risks within different parts of the BPA market.
Truran’s remarks followed a “Dear CEO” letter issued last year warning bulk annuity providers to limit their exposures to risks. Life Insurance Stress Tests, currently underway, will be closely watched for any measures that could limit the growth of the PRT market.
Also on participants’ minds will be the fate of government proposals to unlock surpluses from schemes, a move that could see more sponsors run on their schemes.
Wetton suggested a factor that might be a headwind to further growth would be a shortage of manpower among insurers, a common observation among market participants.
“There’s a flood of money coming in and insurers are much more open to smaller deals, but it is also true that they’ve got limited capacity in terms of the number of deals they can do,” he said.
Some of the consulting firms in the market publish half year data, as well as their full year reports, that attempt to put a definite number on the aggregate market size, but these reports are typically published with a lag, so it could be some weeks until the market gets an indicator into the extent to which 2025 is pacing versus last year.
Still, when the book closes on 2025, Millington says that it could be another year of record, or close to record, activity.
“Overall, our expectations are that similar volumes of business will be achieved in 2025 relative to 2024.”
