The UK bulk annuity buy-in market is set to skyrocket over the next 15 years, Hymans Robertson has said.

According to Hymans Robertson’s annual Risk Transfer Report, an estimated £700bn of defined benefit pension scheme liabilities could be passed to insurance companies by 2032.

The report revealed a growing demand from DB schemes to complete buy-ins and buy outs, with around a third expected to reach self-sufficiency over the next 15 years. If this is the case, there would be around £50bn a year of bulk annuity transactions by 2032, in comparison to current transaction volumes of between £10bn and £15bn a year.

Over the first half of 2017, Hymans Robertson said it has already seen close to £5bn worth of buy-in and buy out transactions and is expecting transaction values to go beyond £10bn for the third consecutive year.

Considering the rest of the year, Hymans Robertson head of risk transfer buy-out solutions James Mullins commented: “A number of insurers haven’t met their bulk annuity targets for the first half of 2017 and so the willingness to complete buy-ins and buy-outs with pension schemes is currently high. This will not always be the case. As more and more schemes consider insuring their risk, insurers will be increasingly less able to keep up with demand. When this happens they will be more likely to give priority for their best pricing to pension schemes that have already completed a buy-in… So pension schemes who take proactive steps to chip away at the problem by capturing opportunities to complete a series of buy-ins will be in a strong position in years to come.”

In the short term, the report also considered the implications of Brexit on transactions and said that most insurers have noted that while the increased volatility following the referendum has resulted in some challenges, it has also presented opportunities. Hymans Robertson risk transfer specialist Harry Allen said: “Whilst there will no doubt be more noise and uncertainty as the Brexit negotiations progress, we expect that the buy-in market will remain robust.”

Mullins added: “It is not surprising that more DB schemes are looking to offload risk in the wake of all the challenges surrounding their long-term affordability and sustainability. If demand for buy-ins quadruples, as we predict, this is a phenomenal increase. Pension schemes should be proactive and gradually chip away at the problem through a series of well-timed buy-ins, to take advantage of the high insurer appetite and optimal pricing we’re seeing in the market today.”

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