How have new entrants to the bulk annuity market impacted transaction processes?

Dave Hale assesses the pros and cons of working with a new BPA market entrant

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Dave Hale
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Dave Hale

Over the last nine months there have been three new entrants to the bulk purchase annuity market – Royal London (September 2024), Utmost (January 2025) and Blumont (March 2025). This has taken us to eleven active insurers within the market. This growth reflects the significant demand from pension schemes to secure their liabilities with a bulk purchase annuity insurer.

The entry of these insurers has brought additional pricing/transaction capacity and extra competition to the market. Despite markets moving in ways which traditionally would have resulted in less favourable pricing, insurer pricing has remained at attractive levels (by historical standards). This could be, at least in part, due to these new insurers offering attractive pricing to prove their credentials, and established players seeking to defend their ground.

The presence of these new entrants has also introduced significant additional choice for pension scheme trustees and sponsors, particularly at the smaller (sub-£50m) end of the market. Aside from the very smallest (sub-£10m), most schemes are typically currently able to obtain quotations from multiple insurers. This is in contrast to the position in 2023 and at the start of 2024, when many smaller schemes had a limited choice of insurers.

Considerations for trustees and sponsors

Many trustee boards and sponsors now find themselves in a position where they need to consider whether these new entrants should be included in transaction processes. This has made it increasingly important for trustees and sponsors to consider at an early stage whether they would be comfortable transacting with a new entrant.

This can be challenging decision for trustees and sponsors to grapple with, as new entrants are, by definition, an unknown quantity - they don't have a long track record of completing transactions, moving schemes to buyout and providing a high-quality service to trustees and members. In addition, there may also be concerns over what would happen if they don't achieve the level of success they are targeting. Would they exit the market having accumulated only a small book of business? If so, could this impact the level of service received by members?

Before including a new entrant in a transaction process trustees and sponsors should meet with them to understand their business plans and operating model. This can provide comfort around their offering, and highlight the benefits of a potential transaction with them. Important areas to understand might typically include:

  • What level of experience their team has at completing bulk annuity transactions, ensuring a good quality service is provided to members, and transitioning schemes from buy-in to buyout (where relevant).
  • How they manage their pipeline, and in particular what they do to ensure the number of transactions completed is manageable from a policyholder service perspective.
  • What are their new business plans, and what action would they expect to take if they do not achieve the level of market traction hoped for.
  • How do they intend to invest their assets and how will this evolve over time.
  • Newer entrants may not need to use reinsurance in the short-term due to offsetting balance sheet risks but are likely to require reinsurance to really expand and meet their ambitious growth objectives. Do they intend to use funded reinsurance arrangements in the medium-term, and when do they envision reinsuring their longevity risk?

Some trustee boards may also choose to carry out more focused due diligence on new entrants. In such cases, it is worth considering advisers who can support this process with detailed, tailored reports on the financial strength of these insurers and their administration offerings.

The decision to work with a new insurer will also need to be justified to members, who may challenge trustees on their approach. Trustee boards should engage with advisers early in the process to develop clear communication plans, helping ensure members feel comfortable and informed with the trustees' decisions. It is more important than ever that trustees clearly document their decision-making process, including their due diligence on any counter parties, which can be pointed to in the event the decision to transact with a new entrant is questioned by members.

Competition is delivering better outcomes

While there are additional considerations for trustees and sponsors considering working with a new entrant, there are also potential benefits. Both directly and indirectly, the dynamics of the market are changing due to some of the positives that new entrants bring:

  • Competitive pricing, as the newer entrants are eager to win clients and prove their credentials, this may also influence how existing players price individual transactions.
  • The ability to move schemes through buy-in period without any backlog from historic deals could be attractive to some buyers. Custom built systems and processes to improve the client and member experience will help new entrants stand out but we are seeing continued innovation across the whole market.

Dave Hale is a senior consulting actuary at Barnett Waddingham

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