Around £40bn is expected to leave defined benefit schemes through bulk annuities and member transfers in a “record-breaking year for risk transfer”, JLT Employee Benefits has said.
Publishing its buyout market watch for October today, 31 October, JLT said as much as £35bn of bulk annuity deals could go through by the end of the year, with a further £10-£20bn expected to be transferred to defined contribution schemes via individual member transfers.
Deals such as Nortel Network Pensions Plans £2.4bn buyout and British Airways £4.4bn pension scheme buy-in, both with Legal and General, have seen the insurer transact almost £7bn in H2 2018 alone.
JLT director and head of buy-ins and buyouts, Harry Harper said: “Members taking individual transfers are also at an all-time high and getting higher, meaning that money is now starting to leave DB schemes at a serious rate. Insurer turnaround times, some now down at 5 days, are stunning, but at other times there have been months of delays as capacity issues strike.
“Not satisfied with this rate of outflow, the government is keen to look at how to “consolidate away” even more liability.
According to JLT, insurers are keen to stress that the market has not been “exhausted”, but that many firms are fully focused on deals already in the market, while many schemes are being given the option to transact immediately or defer until 2019.
The rate of outflow looks only set to continue, with consolidators Clara Pensions and The Pensions SuperFund waiting in the wings to soak up substantial DB liabilities.