L&G predicts 25% growth in small- to mid-sized PRT deals despite Covid-19 impact

The number of small- to mid-sized pension risk transfer (PRT) transactions could increase by up to 25 per cent in 2020 despite the ongoing Covid-19 pandemic, according to analysis by Legal & General (L&G).

L&G’s latest Pension Risk Transfer Monitor stated that there has already been an increase in small- to mid-sized transactions (covering liabilities of less than £100m), with L&G itself having written over 20 deals in the year to date.

It explained that despite the ongoing pandemic and market volatility, 2020 looks to be a “strong year” for the PRT market, with volumes for defined benefit (DB) pension schemes in the UK expected to reach £25bn.

However, the report clarified that it does not anticipate volume at year end to match the level of activity seen in 2019, when larger-scheme transactions and ‘mega deals’ dominated the market, including five transactions over £3bn.

It emphasised that whilst the lack of mega deals in 2020 will likely impact overall transaction volumes, it will likely present an opportunity for those smaller schemes that have previously been “overlooked”.

The update echoes similar previous industry predictions, with Willis Towers Watson recently estimating that the total value of bulk annuity deals will reach £20-25bn in 2020, and Lane Clark Peacock predicting a 25 per cent increase in small scheme buyouts.

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