29 May 2020
According to LCP research the number of buy-ins/outs under £100m fell 30%, from around 150 transactions 5 years ago in 2014 to 106 transactions in 2019 as ‘mega-sized’ transactions have dominated the market.
However, over the last twelve months LCP has seen a surge in demand from smaller schemes wanting to take advantage of attractive insurer pricing. LCP predicts 2020 will be a strong year for smaller schemes and that the number of transactions under £100m will increase by 25% compared to last year.
The £95m full buy-in between the British Bankers’ Association (BBA) Pension Scheme and Aviva announced yesterday is the 50th transaction that LCP has completed through its streamlined buy-in/out service for smaller transactions. It is the tenth such transaction in the last six months and takes total volumes through the service to over £1.5bn, a 50% increase since last year.
David Stewart, partner at LCP and architect of the LCP streamlined process, commented: “The number of smaller transactions has been falling in recent years so we are really pleased to have seen a surge in smaller transactions completing through our streamlined process in recent months.”
“It shows that our streamlined buy-in and buy-out services are vital to help smaller schemes get insurer engagement in a busy market that they might otherwise be crowded out of. Through pre-negotiated contracts and other streamlining smaller schemes can achieve pricing and terms that are just as attractive as that of larger schemes.”
“There are expected to be a smaller number of mega-sized transactions this year which should help open the door for smaller schemes that are transaction ready and use a streamlined approach to market that is attractive to insurers. Despite the upheaval of Covid-19, we continue to complete transactions and are expecting the number of transactions under £100m will increase by 25% this year.”
Sean Burnard, Director of Law Debenture and the Sole Corporate Trustee of the BBA Pension Scheme, said: “The LCP streamlined service gave me confidence that we are using a robust and well used process to obtain a high quality insurance policy that will protect the pension payments to our members. We are really pleased with the result especially in such challenging market conditions”
Jamie Cole, Head of Bulk Purchase Annuity Origination at Aviva, said:
“Streamlined processes play a crucial role in helping smaller schemes to transact in a busy market. Aviva is committed to supporting schemes of all sizes to achieve their goals and LCP’s streamlined process allows us to quote and execute transactions efficiently.
“Knowing that a transaction will be expertly managed with pre-agreed governance and legal frameworks in place and well-prepared data is a tremendous benefit. It gives the insurer confidence to commit resources to a greater number of small scheme transactions and it helps schemes to secure attractive pricing in a busy market”.