Pension buy-ins and buyouts expected to reach £30bn in 2021

Pension scheme buy-ins and buyouts could reach £30bn in 2021, with a further £25bn of longevity swaps alongside this, according to forecasts from Willis Towers Watson (WTW).

The company predicted that 2021 will present opportunities for all sizes of schemes, as has been the case in 2020, as well as the first deals for superfunds in a “landmark market development”.

It also emphasised that, despite the challenges stemming from the pandemic, the bulk annuity market had shown “great resilience” in 2020, with over £30bn of buy-ins and buyouts completed.

This was in addition to over £24bn in longevity swap deals, with several more in progress for early 2021.

WTW stated 2020 could beat 2019 as the biggest year ever for the longevity de-risking markets, with combined transaction values expected to be at a very similar level to last years’ record breaking £56bn of liabilities transferred.

WTW Transaction Team senior director, Shelly Beard, stated: “The fact that the longevity de-risking market has hit the volumes we predicted in December 2019, despite all of the unanticipated head winds in 2020, is a testament to the strength of the market and the focus that trustees and sponsors have shown this year to do the right thing for members.

“A few years ago, many were predicting exponential growth in this market, whereas 2019 to 2021 will all have very similar new business volumes.

“This reflects general falls in scheme funding levels over 2020 as well as the many other priorities trustees have to focus on this year and next – most notably Guaranteed Minimum Pension (GMP) equalisation."

She added: “Looking beyond 2021 we expect the market to grow further. Our clients recognise that future prospects for longevity are more uncertain now than at perhaps any time in recent memory.

"This means that, where it is affordable to so, transferring risk to the insurance market is the prudent thing to do.

“The key thing for schemes going into 2021 with de-risking ambitions is to stay agile on the timing of any deal. It seems likely that 2021 will be another year of uncertainty and this may present opportunities for well prepared and flexible schemes.”

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