UK - Allianz Global Investors is contemplating a move into the burgeoning UK bulk annuity buy-out market at a time when the viability of such businesses is being called into question.
Global Pensions can exclusively reveal that Allianz is in talks with a number of young companies to understand the “risks and opportunities” presented by the market.
Recent entrants to the market, previously dominated by Legal & General and Prudential, include Paternoster and Synesis Life.
Brigitte Miksa, head of international pensions at Allianz, refused to comment on the likeliness of a tie-up with another firm, but said: “This is a market we are highly interested in. We have had contact with different participants in this market and we are keen to understand both the risks and opportunities presented by the market.
“It’s a new market that’s developing – only after having seen a number of successful transactions will it be possible to estimate if there are potential partners in this market for a successful cooperation.”
However, some claim the lack of transactions proves the demand for buy-outs from defined benefit pension funds has been over exaggerated by new entrants.
One industry source, who asked to remain anonymous, suggested providers had offered a solution in search of a problem: “These bulk annuity buy-out merchants have raised £1-1.5bn to create these companies and there was supposed to be a lot of demand, so where is it? It seems pretty clear that the corporate treasurer doesn’t want to pay the price, otherwise we would have seen some transactions.”
Graham Brown, pensions manager, Barnardo’s Staff Pension Scheme, said: “Annuity rates will need to soften substantially before [schemes] are willing to bite. There has to be an incentive for schemes to buy-out liabilities and that just isn’t there at present.”
But Simon Gadd, managing director of annuities at Legal & General, argued it was simply a matter of time: “Our experience of this market is the process can be quite drawn out. What we’ve been dealing with for a number of years has been wound up pension schemes, where it’s only a matter of time before they will buy-out.
“The new entrants have been talking about active or open pension schemes, and it might well be that a scheme has to wind up before they buy-out, if that’s their intention.”
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