Joe Hathaway, Associate Partner, AON
The smaller end of the bulk annuity market (what we consider to be at sizes of less than £150 million) continues to transform at a rapid pace, and 2025 has seen some of the most significant shifts yet. As schemes become increasingly well-funded and eager to deliver value for members, the definition of what is possible for smaller transactions is being rewritten.
Gone are the days when only the largest schemes could command innovative investment solutions, for example, or choose an insurer with administration capabilities that best suits their needs. Insurers are increasingly willing to work with schemes to find solutions at the smaller end, where these are considered and presented in the right way.
Innovative solutions at smaller sizes
Across a series of recent transactions, investment solutions have made their way to the forefront of risk settlement conversation for small schemes. Traditionally, features like asset-locks and in-specie transfers have been the preserve of large transactions. But over the last year insurers have been increasingly accommodating for smaller schemes. This is something that we achieved on our smallest transaction of the past 12 months (£3 million), where we successfully negotiated a price-lock to the scheme's assets and premium payment via an in-specie asset transfer – demonstrating that, with the right advice and approach, small schemes can secure features to maximise affordability and certainty.
A further example of innovation was a recent £50 million transaction that had a clear objective to move to buyout in an accelerated timescale. To achieve this objective, we structured the transaction to allow the scheme to pay a single premium up-front by addressing member movements during exclusivity and implement insurer factors immediately on buy-in. These actions avoided the need for extensive data cleanse and crucially for a balancing premium to be paid, helping the scheme move to buyout quickly and efficiently.
These two examples are a clear signal to trustees that complexity doesn't have to be a barrier, as long as you have the right advocacy and a compelling case to take to market.
The return of true competition: More insurers, more auctions, more choice
One of the most notable shifts in 2025 has been the changing dynamics of insurer engagement for small schemes. Over the last few years, exclusivity became a near-requirement for certain transaction sizes, with schemes partnering with an insurer up-front to obtain a quotation.
Now, however, we are seeing a reversion towards more competitive auction processes in the sub-£150 million space, largely as a result of two key developments which has increased competition at the smaller end:
- New entrants have joined the market, increasing available insurer capacity; and
- Established players, who previously only targeted larger transactions, are showing new interest in smaller schemes.
The upshot for trustees has been a broader range of options than they may have had in previous years, and in our view more choice is always a positive in helping trustees select an insurer that best meets their key objectives.
Administration: Putting member experience front and centre
2025 has also seen a continuation of the shift in small scheme priorities, with administration and member experience moving further up the agenda. Historically price has been the dominant consideration, but as funding levels improve and insurer competition heats up, the focus on non-pricing differentiators has come to the centre.
Trustees are now placing greater emphasis on the post transaction phase of a schemes' journey when selecting a counterparty – in particular, the support offered by insurers to onboard schemes in an efficient way once an initial transaction has taken place, and the quality of the insurers' administration service post buyout, when members will interact with the insurer directly.
With more insurers in the mix at the smaller end, and with different administration models and approaches to onboarding schemes, it's perhaps no surprise that this tends to be an area where there is more variation between insurers, and has therefore been an increased area of focus and discussion for Trustees when selecting insurers.
Insurers have responded to these evolving expectations by investing significantly in their administrative platforms and client service teams. Improvements in these areas are quickly becoming a distinguishing characteristic in the market, with schemes often selecting insurers based on the quality of the ongoing member experience they can deliver.
Gazing into the crystal ball
The past year has demonstrated that the pace of evolution at the smaller end shows no signs of slowing. More schemes than ever are approaching the market 'transaction ready', and more are demanding (and receiving) solutions that deliver not just on price, but on the key non-pricing terms, such as member experience, that are increasingly driving trustee's decision making.
If you're considering your scheme's long-term future or simply want to understand how market dynamics are changing, now is the perfect time to reach out and explore your options.
Further insights on what insurers are expecting for smaller schemes will be discussed on our webinar on 3 December 2025. Further information can be viewed here
