Industry Voice: How bulk annuities are improving outcomes for members and society

Standard Life’s Defined Benefit Solutions business is facilitating investment into UK infrastructure and socially responsible projects, and helping members facing the hardship of rising inflation, says Matt Richards, a Senior Business Development Manager at Standard Life

clock • 3 min read
Matt Richards, Senior Business Development Manager at Standard Life

Matt Richards, Senior Business Development Manager at Standard Life

Historically, bulk annuities were focused on pensioner-only transactions, but there's been increasing demand to insure deferred members. How important is it for providers to take on deferred members? And is more innovation in the market required to insure them?

Matt Richards: We've seen increased demand in the market for full-scheme transactions and insurers are responding to that. Standard Life entered the external market for deferred transactions at the start of 2021, so we were pleased to complete two full-scheme buy-in deals with the Gallaher Pension Scheme and the PerkinElmer (UK) Pension scheme last year.

As Standard Life's purpose is to help people secure a life of possibilities, we are developing our offering to provide the best experience we can for our customers. We put our policyholders at the heart of everything we do, and we know that member support and experience is a key factor in decision making for trustees. For example, we provide flexibility for members and an all-encompassing solution for trustees by working closely with our colleagues that offer DC workplace pensions to ensure we can provide a joined-up DC/AVC solution to those schemes that need it.

In recent years, many schemes have taken a phased pensioner buy-in approach, but increasing funding levels mean many are now setting their sights on securing their liabilities in full. Therefore, having the ability to facilitate the growing demand for buyouts is crucial for insurers.

How are bulk annuities providing security to members in the rising inflation environment?

Matt Richards: Purchasing a buy-in provides a perfect matching investment for the liabilities that are insured, which removes longevity, market, interest rate and inflation risk. We bear the risk for the scheme where a high and rising inflationary environment persists, which leads to higher-than-expected increases to members' pensions. We match the existing promise the scheme has made to its members, so the trustees no longer need to worry about inflationary volatility. The insurer will pay the member benefits insured for as long as the members and their dependants live.

How can Standard Life's growing Defined Benefit Solutions business be used to generate more sustainable outcomes, both for the environment and society?

Matt Richards: Phoenix Group is one of the UK's largest asset owners and it is imperative we take a lead role in driving change. Part of our commitment to helping people secure a life of possibilities is supporting the world in which our customers live, and we have made strong progress in integrating ESG considerations into our investment strategy, risk management and governance processes.

The bulk annuity business we write supports our investments in renewable energy, infrastructure and other high quality long-term financing projects which benefit wider society. We're particularly proud of our social projects which align to both our sustainability agenda and social purpose. For example, we have invested £80 million to support the Nissan plant in Sunderland, which will be manufacturing electric-only and hybrid vehicles. While this aligns with our sustainability agenda, we are also proud that this also creates jobs and supports growth in Sunderland.

How is Standard Life, as part of Phoenix Group, addressing sustainability in its business, such as reducing carbon emissions?

Matt Richards: Phoenix Group is committed to addressing the challenges of the climate crisis and has set a number of decarbonisation targets on our journey to net zero. We are targeting net zero for direct operational emissions by 2025 and have been taking actions across our offices to get us there. An example of this is the installation of solar panels at our largest office.

We are aiming to reduce the carbon emissions intensity on £250 billion of our investment portfolio by at least 50% by 2030, and are working towards our entire investment portfolio being net zero by 2050.

We have extended our net zero expectations to all our key partners and suppliers via a call to action in an open letter issued in December. In this letter, we set out our expectation to expand carbon reduction targets to our entire supply chain to help us on our journey to net zero.

This post is funded by Standard Life

More on Defined Benefit

Continued stable DB funding prompts re-evaluation of endgame strategies

Continued stable DB funding prompts re-evaluation of endgame strategies

PwC research says it is ‘critical’ for schemes to assess full range of options for their endgame

Martin Richmond
clock 05 April 2024 • 2 min read
Record levels of scheme surpluses raise danger of them becoming 'trapped'

Record levels of scheme surpluses raise danger of them becoming 'trapped'

Sponsors urged to negotiate ‘robustly’ on funding assumptions and agreements

Jonathan Stapleton
clock 04 April 2024 • 2 min read
Professional Pensions' DB Funding Index

Professional Pensions' DB Funding Index

How the funding of defined benefit pension schemes is changing

Jonathan Stapleton
clock 04 April 2024 • 1 min read