£65bn of pension de-risking transactions expected in 2022

This year is set to be the largest on record for pension scheme de-risking deal volumes, with £65bn of bulk annuity and longevity swap transactions anticipated, according to research from WTW.

WTW also revealed that nearly one in three (30 per cent) pensions schemes expect to de-risk their liabilities in the next three years, and 2022 is likely to be a peak year.

This busy year is reportedly due to a combination of competitive market pricing, pent-up demand from the pandemic, and competition between insurers and reinsurers seeking to fill their expanded targets.

WTW’s annual De-risking Report predicted that the £65bn will be made up of £40bn of bulk annuity transactions, while longevity swaps are expected to complete the remaining £25bn.

WTW Transactions Team senior director, Sadie Scaife, commented: “We know that market conditions are likely to be favourable this year and the demand from pensions schemes is there, which is why we’re predicting 2022 to be the biggest ever year for pension scheme de-risking across both bulk annuity and longevity swap markets.

“The £40bn of buy-ins and buyouts we’re anticipating are likely to be from repeat deals as well as new pension schemes coming into market.

“We are also expecting the gradual trend towards full buyouts to continue, as schemes mature and funding levels improve, but also as PPF+ cases complete transactions.

“In these busy market conditions we expect insurers and reinsurers to become more selective about which opportunities they will commit resources to, with schemes needing to be flexible on timescales if they want to maximise competition.

“For trustees, more than ever, the focus will be on the security of member benefits, the member experience and an increased focus on environmental, social and governance issues when selecting a provider for bulk annuities and longevity swaps.

“With more options now available to schemes, since the approval of the UK’s first superfund, trustees will expect their insurance partners to demonstrate how they will provide financial security, as well as a commitment to ensuring an excellent member experience through modern and fit for purpose administration, clear communications and detailed transition planning.”

This busy year comes after a mixed year in 2021, when the bulk annuity market recovered from a slow start to record the third largest year ever for pensions de-risking deals.

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