Half of DB pension liabilities to be insured by 2031

Around half of the UK’s £2trn defined benefit (DB) pension liabilities are expected to be insured by the end of 2031, according to analysis from Hymans Robertson.

The firm’s Annual Risk Transfer Report revealed that around £1/3trn pension scheme liabilities have already been insured, covering 1.4 million members’ benefits, with more than £150bn of this put in place in just the past three years.

Hymans Robertson partner and head of risk transfer, James Mullins, suggested that these figures will grow "materially" within the next 10 years, particularly in light of the "rapid growth in demand for pension schemes to insure their risks, along with improved pension scheme funding levels, attractive insurer pricing and new alternative risk transfer options".

“To the extent, we believe, that £1trn of pension scheme liabilities will have been insured, covering 5 million members’ benefits," he stated. "That’s half of all of the UK’s private sector DB pension scheme liabilities."

Mullins explained that this could also bring a "material shift" for pension scheme members over the next decade, as pensions have previously been managed, and paid, by a group of trustees, linked to their previous employer.

"Going forwards, their pensions will be increasingly managed, and paid, by insurance companies," he clarified.

“Removing the link between their pension and previous employer will feel like a significant change to many members and so needs careful communication to set out the benefits.

“Five million, or more, individuals will increasingly look to the UK insurance regime, with oversight from the Prudential Regulations Authority and the Financial Conduct Authority (FCA), to protect their pensions going forwards.”

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