H1 2020 bulk annuity volumes second highest on record despite Covid-19

Total pension buy-in and buyout volumes reached £12.6bn in H1 2020, the second highest H1 on record, LCP analysis has revealed.

H1 2020 bulk annuity deal volumes were down by £5bn in comparison to H1 2019, the highest half year on record, however they totalled £4.8bn more than H1 2018.

A further £2.4bn of buy-ins and buyouts have been announced since H1 2020, resulting in total volumes so far in 2020 reaching £15bn, while £12.4bn of liabilities have been covered through longevity swaps so far this year.

LCP said that findings demonstrated how resilient the pensions de-risking market has been to the Covid-19 pandemic.

“At the start of the year we predicted buy-in and buyout volumes would reach around £25bn in 2020,” said LCP partner, Charlie Finch.

“With £12.6bn transacted in the first half of the year, the market remains on track to reach £25bn. Unlike many industries, the Covid-19 crisis has not reduced activity in this market.”

Around 78 per cent of bulk annuity deal volumes were completed by Pension Insurance Corporation (PIC), Legal & General (L&G) and Aviva, with market shares of 28 per cent, 25 per cent and 24 per cent respectively.

There have been three transactions of over £1bn in 2020 so far, the £1.6bn buy-in by MNOPF with PIC and the two £1bn Co-op pension scheme buy-ins with Aviva and PIC.

In comparison, there were 12 deals in 2019 worth over £1bn.

There were a greater number of mid-sized transactions in H1 2020, with 22 transactions between £100m and £500m completed compared to 11 such deals in H1 2019.

LCP partner, Imogen Cothay, added: “Buy-in pricing has fallen back since April but continues to be at attractive levels. With some insurers having written less so far than last year we expect there to be pricing opportunities toward the year end, particularly for those schemes which can be nimble.

“Alongside the impact of Covid-19 we are seeing the development of capital-backed solutions which are providing new options for schemes considering their de-risking journey. This includes DB superfunds where there is increased interest following the guidance issued by The Pensions Regulator in June, particularly where schemes have a stressed or insolvent sponsor.”

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