Consulting firm Lane, Clark & Peacock has published its annual report analysing the pension risk transfer market in the UK.
The report, now in its 18th year, suggests that market volumes have reached “cruising altitude” with 2024 on track to close a little below the record £49.1bn observed in 2023. Whilst buy-out funding levels and demand for insurance remains high, LCP estimates that increased interest in longer-term run on and alternative endgames will have a smoothing effect on demand, leading to volumes averaging out at broadly 2024 levels over the next decade.
Furthermore, LCP estimates insurer capacity has expanded to comfortably support over £50bn of annual new business at competitive pricing. New business resource, which had previously been a key insurer constraint, has improved due to established insurers ramping up their operations and streamlining their processes, plus three new entrant insurers – with potentially one more to follow – which would take market participants to a record 11 insurers.
“Last year we saw a seismic shift in the market with demand for buy-ins and buy-outs rocketing on the back of improved funding levels. Coming into 2024, we’ve seen dynamics stabilise and volumes reach ‘cruising altitude’. As schemes assess their strategic endgames and insurers ramp up their capacity, we see a healthy and buoyant market that serves the needs of schemes moving to insurance – both now and in the future,” said Charlie Finch, Partner a LCP and report author.
“The shift in the market dynamics is bringing opportunities for pension schemes. Insurer participation rates have bounced back as insurer capacity has expanded to support over £50bn of volumes at competitive pricing. This has led to the most competitive full scheme pricing in years and has given schemes the leverage to seek improved insurer commitments in key priority areas such as member service,” added Imogen Cothay, Partner at LCP and report author.