Smaller pension de-risking deals ‘crowded out of the market’

Smaller pension scheme buy-in and buyout deals are being crowded out of the market, according to LCP, whose research showed the number of deals worth less than £100m had fallen by 30 per cent in the past five years.

LCP said that insurers were increasingly focused on larger transactions, which had led to an increase in demand for smaller schemes to operate via a streamlined service.

The firm recently completed its 58th transaction using its streamlined buy-in and buyout service, bringing the total liabilities secured through this service to over £2bn.

The latest deal was for the Artemis (Closed) Pension Plan, which completed a £19m full buy-in with Just Group in August 2021.

LCP noted that a “key factor” in the successful transaction was the scheme’s governance, with the scheme having a sole trustee who worked closely with the sponsor throughout the process.

Furthermore, the scheme’s data and benefit documentation were ‘transaction ready’, allowing the scheme to move quickly when attractive market conditions arose, which ultimately led to favourable pricing and competitive terms via the pre-negotiated contracts, according to LCP.

LCP added that it believed using a streamlined process for sub-£100m deals will increasingly become the norm, with some insurers asking for the streamlined approach for transactions as large as £200m.

Commenting on the deal, PSGS client director and Artemis (Closed) Pension Plan trustee, Mark Fletcher, said: “I am delighted to have completed this transaction - it is a significant de-risking step for the plan and its members. 

“Through the preparation of the plan and the use of the streamlined service we were able to react quickly to favourable market conditions and achieve attractive pricing.”

Just business development manager, Peter Jennings, added: “While modest in size, this transaction carried a large proportion of deferred members and allowed us to demonstrate our new proposition and competitive pricing in this subsection of the market. And the benefit of the LCP streamlined service meant this was a smooth and well-managed transaction.”

LCP partner, Catherine Hopper, who led the transaction, concluded: “We are delighted to see, even in the current very busy bulk annuity market, schemes that present well-prepared data and benefits, have good governance in place and come to market using our streamlined service continue to get insurer engagement and attractive pricing, despite the market being dominated by the larger transactions.”  

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