An estimated £18bn was spent on bulk annuities in 2016, Aon has revealed.

According to Aon’s UK Risk Settlement Bulletin, strong demand to transfer risk from UK pension schemes and insurers themselves led to the completion of transactions totalling 30 per cent more than the previous market peak.

Around 50 per cent of the projected £18bn bulk annuities was from the purchase of back-books from insurance companies, including the £9bn Aegon portfolio shared by Rothesay Life and Legal & General.

Aon also noted that phased approaches to risk settlements were considerably common in 2016. It seemed that annuity deals encouraged trustees and corporates not to wait for funding levels to improve before settling key risks. Rather, they chose to secure benefits in tranches that come at a price, but significantly improved their solvency levels.

Looking on to this year, Aon highlighted signs that opportunities will continue in 2017 for schemes seeking to secure an annuity. Pricing has been viewed as favourable “with a return in excess of gilts widely available for most schemes” the Bulletin said.

Also, other methods of hedging longevity risk such as a swap has continued to develop. This includes a number of structural options that are now available for larger schemes seeking to hedge these risks.

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