Martin Bird, Senior Partner and Head of Risk Settlement, Aon
The UK bulk annuity market has continued its remarkable trajectory through 2025, with deal activity reaching new heights and the sector demonstrating resilience, innovation, and adaptability in the face of evolving challenges.
Celebrating 300
As in recent years, the bulk annuity market once again rose to the challenge over 2025, supporting pension schemes, of all shapes and sizes, from sub-£20 million cases to multi-billion pound ‘mega-deals'.
For the first time ever, the anticipated total number of deals is set to comfortably surpass 300 – more than one transaction, on average, for every working day of the year. With total volumes transacted in 2025 expected to be around £40 billion, this means the total tally of all liabilities insured via bulk annuities will break the £300 billion barrier by year-end.
Aon is proud to have played our part in the success of the market this year, including leading the deals for BP, Ford and National Grid. The £4.6 billion Ford transaction stands out as the largest announced deal of the year, and in the top 5 largest deals since the bulk annuity market began. But it's not all about size – just as importantly, the smallest Aon-led transaction of 2025 was under £10 million, demonstrating both the scale and competitiveness of the market to support schemes at each end of the spectrum.
Responding to challenges
At the start of the year, Aon's Dear CEO letter set out our views on six priorities for the industry, urging insurers to focus on member experience, innovation, transparency, and productive finance. The market's response has been tangible:
· Member experience: Our recent experience in supporting trustees during transactions demonstrates that member servicing has become a key differentiator, with some insurers winning deals based on service rather than price alone. To ensure they can compete, insurers continue to make strides in enhancing member options and service quality through the use of technology and additional administration resource. Although not yet common across all insurers, there are signs of increased digital platforms for members providing online access to retirement modelling, improved communication and greater engagement on member options at retirement during the auction phase.
· Insurer contribution to the growth of the UK economy: Our latest insurer survey shows that bulk annuity providers are not only committing significant capital to UK infrastructure and real economy projects but are also embedding these investments into their long-term strategies. In 2024 alone, insurers channelled billions into sectors such as healthcare, education, transport, renewable energy, and housing, with plans to deploy several more billions over the next five years. These actions highlight that the risk transfer market is becoming a cornerstone of productive finance, delivering both financial security for pensioners and broader societal benefits — an important message for pension scheme decision-makers seeking confidence in the sector's future direction.
· Funded reinsurance transparency: Our letter called for greater transparency around funded reinsurance, alongside more visibility and disclosure about risk management strategies. The Prudential Regulation Authority's Life Insurance Stress Tests (LIST) and ongoing reforms to Solvency UK have prompted insurers to review their capital management, asset strategies, and risk controls. The much-anticipated LIST results were released in November and provided greater insight into the resilience of insurers to severe financial market stresses, giving reassurance to policyholders and pension schemes considering a bulk annuity.
Specifically in relation to funded reinsurance, the level of public disclosure is still limited, and the PRA remains focussed on ensuring its use remains tightly controlled. It will be interesting to see how the market develops over the course of 2026.
Market and Insurer Developments
2025 has seen the emergence of alternative endgame strategies, including various forms of run-on and commercial consolidation options. However, Aon research indicates that buyout remains the ultimate destination for the majority of schemes. Insurer appetite is strong, and schemes are increasingly well-prepared, investing in data quality, governance, and project management to ensure successful transactions.
In our recent insurer survey, we asked insurers what they view the key headwinds are for the market, and operational capacity was cited as being a key issue across all insurers. Administration and other key personnel capacity have caused delays for some insurers and advisers in recent years, impacting data cleansing, benefit reconciliation, and slowing the transition from buy-in to buyout. However, insurers and advisers are responding with targeted recruitment, technology investment, and streamlined processes to increase efficiency and regain control any backlogs.
Insurers also pointed to the broad range of asset considerations that remain key to unlocking continued deal activity, both on the insurer side (in particular in relation to tight credit spreads and the ability to originate attractively priced assets to support bulk annuity pricing) and on the scheme side (with schemes needing to determine how best to transition their current assets, often including illiquid assets, to insurer friendly payment portfolios). This is an area where we have seen significant innovation at scale from the insurers, not only in finding new forms of capital and asset opportunities, but also the range of structures to support schemes in an orderly and optimised asset transition, including more bespoke price locks, deferred premium structures and increasing appetite for illiquid assets; indeed it seems that the pension risk transfer market has developed a ‘can do' mindset to enable a continued flow of deals throughout the year.
Looking Ahead to 2026
The outlook for 2026 is positive. Insurers anticipate significant growth in transaction volumes, with no shortage in capital and balance sheet capacity. Our insurer survey suggests that annual targets could reach £60 billion in the coming years. New entrants and acquisitions will continue to shape the competitive landscape, while innovation and digital transformation will drive further improvements in member experience and operational efficiency.
Regulatory changes will require ongoing adaptation, but the sector is well-placed to absorb growth and deliver better outcomes for members. For those schemes that plan ahead, engage early, and focus on execution, there will no doubt be plenty of attractive opportunities to take advantage of in 2026 and beyond.
After a busy 2025, our team is certainly looking forward to using the festive period to recharge, reflect on a year of many highlights, and re-set to go again in 2026.
We wish you all a restful Christmas and New Year!
