LCP anticipates 25% increase in ‘small’ scheme buy-in/outs in 2020

The number of ‘small’ pension scheme buy-in and buyout transactions could increase by 25 per cent year-on-year in 2020, according to Lane Clark & Peacock (LCP).

Its research found that the number of buy-ins and buyouts worth under £100m fell by 30 per cent between 2014 and 2019, from 150 deals to 106.

However, LCP said that is had seen a “surge in demand” from smaller schemes wanting to take advantage of attractive insurer pricing and predicted that the number of transactions under £100m will rise by 25 per cent this year, in comparison to 2019.

LCP partner, David Stewart, said that the firm was “really pleased” to see schemes completing deals through its ‘streamlined process’.

“Through pre-negotiated contracts and other streamlining, smaller schemes can achieve pricing and terms that are just as attractive as that of larger schemes,” he continued.

“There are expected to be a smaller number of mega-sized transactions this year which should help open the door for smaller schemes that are transaction ready and use a streamlined approach to market that is attractive to insurers. Despite the upheaval of Covid-19, we continue to complete transactions and are expecting the number of transactions under £100m will increase by 25 per cent this year.”

The £95m buy-in the British Bankers’ Association (BBA) Pension Scheme completed with Aviva, which was announced yesterday (28 May), was the 50th deal completed through LCP’s streamlined buy-in/out service for smaller transactions.

It was the tenth deal in the past six months through the service and takes the total value of transactions through the service up to £1.5bn, a 50 per cent increase year-on-year.

Aviva head of bulk purchase annuity origination, Jamie Cole, added: “Streamlined processes play a crucial role in helping smaller schemes to transact in a busy market.

“Knowing that a transaction will be expertly managed with pre-agreed governance and legal frameworks in place and well-prepared data is a tremendous benefit. It gives the insurer confidence to commit resources to a greater number of small scheme transactions and it helps schemes to secure attractive pricing in a busy market”.

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