Defined benefit (DB) schemes are set to transfer £700bn of liabilities to insurers in the next 15 years, according to Hymans Robertson.
The pension consultancy believes that demand for bulk annuity buy-in and buy-outs will ‘skyrocket’ by 2032, driven by risk-averse sponsors.
This implies that almost £50bn of such transactions will take place in each of the next 15 years, a huge leap on the current level of £10bn to £15bn worth of deals.
The projected spike in demand will see a third of DB schemes reach self-sufficiency by the early 2030s, Hymans Robertson said.
The consultancy’s head of risk transfer buy-outs, James Mullins, is unsurprised by the report’s findings pointing to DB schemes facing some tough questions on affordability and sustainability.
“Pension schemes should be proactive and gradually chip away at the problem through a series of well-timed buy-ins, to take advantage of the high insurer appetite and optimal pricing we’re seeing in the market today,” he added.
The consultancy’s annual risk transfer report also notes that around £5bn of such transactions have been recorded so far in 2017 and the authors believe that the market will exceed £10bn for a third successive year.
However, not all the signs are positive. Despite the strong start to the year some insurers missed their bulk annuity transaction targets.
