Trustees urged to share transaction pricing when seeking bulk annuity quotes

Trustees should be more open and honest about their criteria when seeking transaction quotes, according to Just director of DB solutions, Tim Coulson.

Speaking at the Pensions Age DB de-risking conference, held in association with Just, Coulson urged trustees to be truly transaction ready when approaching insurers, emphasising that in addition to ensuring clean data, intent and timetable, trustees should also openly discuss their ideal transaction pricing.

At the recent conference, panellists representing a variety of endgame options discussed the overcrowding of the market and how schemes can differentiate themselves.

Addressing this overcrowding, Coulson highlighted that while every request is triaged, less than 50 per cent may be quoted on.

He clarified that quoting on a scheme is much like a mini scheme valuation being undertaken for free, emphasising that insurers only receive a fee once they transact.

Coulson said: “The insurer only gets paid to do a transaction. If you think through that lens, that then helps you understand what makes your scheme attractive to an insurer."

As a result of this, “being open about your criteria and transaction requirements is really important”, he added.

With trustees reluctant to lose their negotiating power, Coulson explained that if trustee’s were to “turn around and say ‘we’ll transact at the lowest price below x’, then that scheme will be a lot more attractive than a scheme that says ‘we don’t want to tell you’”, whilst also maintaining competitive pricing.

Also speaking at the conference, Project de-risk: The DB journey planning summit, Hymans Robertson partner and head of risk transfer, James Mullins, added: “The common reaction [from trustees] is you don’t want to share pricing with insurers and ‘give the game away'.

"Actually I encourage you to do that, insurers are desperate to know what a company hopes to transact at, it gives them confidence”

Mullins also emphasised that this does not need to remove the need for keen insurer pricing though, as “you’re getting quotes from other insurers, and they’re going to be expecting that".

"They have no idea who you’ll go with so that competitive tension is still there, but it really does make a difference [to potential quotes from insurers]," he added.

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