Total pension scheme buy-in and buy-out volumes are set to reach an all-time record of around £18bn in 2018, after a busy first half of the year for the market, Hymans Robertson has predicted.

The consultancy says that the total value of buy-ins and buy-outs in the first six months of 2018 has been more than the value recorded in each year up until 2013, including 2014, which recorded a previous high of £13.2bn in transactions.

The unprecedented amount of activity is largely due to a combination of very attractive pricing on offer by insurers since the end of 2017, and schemes de-risking their assets following a strong recent performance from the equity markets.

Hymans Robertson partner and head of risk transfer solutions, James Mullins, said that 2018 was shaping up to be a remarkable year for the bulk annuity market with market activity at a record high thanks to exceptional pricing.

He pointed to the six most recent buy-ins that Hymans Robertson have been involved in during 2018, where schemes have been able to insure pensioner liabilities at, or even below, their technical provisions reserve.

“Earlier this year, we also saw two highly material insurer-to-insurer transactions, with £12bn of Prudential’s existing annuity portfolio transferring to Rothesay Life, and Phoenix taking on Standard Life’s multi-billion annuity portfolio,” said Mullins.

“Allowing for back book transactions such as these, we expect the total volume of bulk annuity transaction in 2018 to be around £35 billion. These transactions should be considered alongside pension scheme buy-ins and buy-outs as they effectively use up insurer capacity.

“In particular, back book transactions use up operational resource and capital available to insurers that is required to back new business.”

Should this of £35bn figure materialise, then it would represent more than a 100 per cent increase in volume compared to the average market volumes over the past four years.

It would also be significantly higher than the total of the highest annual volumes written by the eight active bulk annuity insurers over the past four years, which stands at £22.6bn.

“The end of the 2018 is shaping up to be very interesting,” added Mullins. “In the current busy market, insurers have more choice than ever regarding which schemes they wish to engage with and use their best pricing on. This will make it even more important to have a careful and considered approach.”

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