Buy-ins and buyouts to reach £20-£25bn in 2020 - LCP

Buyout and buy-in volumes could reach £20bn to £25bn in 2020, potentially becoming the second largest year on record for the transactions by beating the £24.2bn of transactions in 2018, according to Lane Clark & Peacock (LCP).

The firm’s latest pensions de-risking report said the coronavirus pandemic had resulted in attractive pricing, with falls in the price of assets that insurers use to back buy-ins driving price reductions of 5 per cent or more in March and pricing relative to gilts standing materially lower than at the start of the year.

However, fewer ‘mega’ transactions worth more than £1bn are expected than in 2019, leaving the full year well short of the £43.8bn worth of transactions seen last year.

Most insurers initially reported that 10-25 per cent of transactions were delayed as a result of Covid-19, this has since fallen to less than 10 per cent, and LCP said some transactions have been accelerated to benefit from favourable pricing opportunities.

The report showed that pension plans still remain largely open to de-risking plans, with almost 80 per cent reporting no change in their appetite for de-risking and around 10 per cent reporting an increased appetite.

When asked when they expected their scheme to reach full buyout or a self-sufficient position, 30 per cent of pension professionals surveyed said they expected to reach the target in the next three years, up from 10 per cent in 2019.

LCP partner, Charlie Finch, said: “Pandemic panic has not infected business volumes or pricing in the buy-in and buyout market, with Covid-19 so far proving to just be a bump in the road. Insurers have been operating as normal throughout the crisis and the outlook for H2 is strong.

“We have helped nine pension plans complete transactions during lockdown, in many cases accelerated to take advantage of attractive pricing in the wake of the pandemic.

“Of course, we don’t yet know what the long term social and economic impact of Covid-19 will be, but insurer pricing remains better than at the start of the year and we may see further pricing opportunities over the coming months given the tumultuous economic environment."

    Share Story:

Recent Stories


De-risking options for pension schemes
In this latest Pensions Age podcast, Linklaters' Sarah Parkin talks to Laura Blows about the wide range of choice available to pensions schemes for the partial, or full, removal of their risks

Risk transfer opportunities
Laura Blows speaks to Lisa Purdy, Head of Fiduciary Distribution at Legal & General Investment Management and Gavin Smith, Pricing and Execution Director - UK PRT at Legal & General, about the impact of the recent market volatility on the bulk annuity and risk transfer market and the potential opportunities for the future

Bulk annuities during coronavirus
Laura Blows speaks to Just business development manager Prash Mehta about the impact of coronavirus on transactions

Investing in infrastructure
Laura Blows speaks to James Dawes about how, and why, pension funds should be looking at infrastructure as an investment opportunity