Two in five schemes expect to transfer risk within three years, finds Willis Towers Watson
Two in five UK defined benefit (DB) schemes expect to complete a bulk annuity or longevity swap transaction within the next three years, Willis Towers Watson research finds.
A poll conducted at the consultancy's pensions conference in late September found 33% anticipated conducting a buy-in or buyout deal, while 11% expected to conduct a longevity swap deal.
When ranking issues by priority, de-risking placed third over a three-year time horizon, compared to seventh within the next year.
The findings come amid a slightly dampened bulk annuity market this year, with total volumes anticipated to amount to around £25bn compared to the £44bn recorded last year.
Willis Towers Watson pensions transactions senior director Shelly Beard said: "This research backs up our own experience that shows more and more schemes approaching the risk transfer market. Pricing remains attractive and more schemes are emerging from the short-term focus necessitated by the early stages of the pandemic to focus on longer-term future planning and risk management."
However, the 2020 market is characterised by smaller deals by volume, and longevity swaps are expected to be more popular than in recent years.
Beard added: "2020 has been a very busy year in the de-risking markets - with more than £50bn of liabilities expected to be transferred to the insurance market through longevity swaps or bulk annuities,
"If 40% of all pension schemes choose to undertake a transaction over the next three years as our survey suggests, that could equate to schemes with more than £600bn of assets. Even if most will only transact on a portion of their liabilities, this still indicates an incredibly busy marketplace and compares to around £300bn of liabilities transferred over the entire history of the bulk annuity and longevity swap markets so far."
The survey also found that 71% of trustees and pension directors felt the introduction of superfunds was a positive development, an increase on the 62% surveyed in June, while one in five had already held discussions on whether the market would be an option for their scheme.
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