Full scheme transactions now “dominate” the defined benefit (DB) pensions bulk annuity landscape, constituting all £10bn worth of deals made so far this year, XPS Pension Group has revealed.

XPS’s Bulk Annuity Tracker showed increasing demand for full scheme transactions over the past three years, increasing from below £20bn in 2020 to above £20bn in 2022.

This increased demand for full scheme transactions was attributed by XPS to the “significant” funding gains made last year and concerns about liquidity for those schemes previously contemplating phased pensioner buy-ins.

XPS also provided insight into how much funding levels had increased, with its DB:UK tracker estimating that buyout funding levels increased by 26 per cent for a portfolio of typical schemes, rising from 69 per cent at the start of 2022 to 95 per cent at the end of the same year.

This improved affordability of full buyouts for schemes was attributed to a combination of higher gilt yields, lower cost longevity pricing, insurer competition, and asset outperformance by XPS.

XPS risk settlement partner, Harry Harper, commented: “As a result of improved scheme funding, the bulk annuity market is now busier than it’s ever been, with record volumes in the market and some insurers already in exclusivity arrangements on a number of significant buyout transactions.

“We fully expect 2023 to be a record year, exceeding 2019’s £44bn of transactions. With such high demand, we are seeing insurers become increasingly selective on which deals they’ll bid on, making it more important than ever for schemes to adequately prepare for transactions ahead of going to market.”


This article first appeared on our sister title, Pensions Age.

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