11 September 2020
Analysis released today by Lane Clark & Peacock (LCP) shows that total buy-in and buy-out volumes by UK pension schemes reached £12.6bn in H1 2020. This is the second highest H1 ever behind H1 2019 (£17.6bn) and a 50% increase on H1 2018 (£7.8bn), demonstrating how resilient the pensions de-risking market has been to the Covid-19 pandemic.
With a further £2.4bn announced since the half year, total volumes so far in 2020 have now reached £15bn. Additionally, £12.4bn of liabilities have been covered through longevity swaps so far this year.
LCP’s analysis is based on the insurers’ reported half year figures, including PIC’s results which were released yesterday. Key findings in LCP’s analysis are:
- H1 2020 was dominated by three insurers who between them wrote 78% of total volumes. These were Pension Insurance Corporation (PIC), Legal & General (L&G) and Aviva, with market shares of 28%, 25%, and 24% respectively. Whilst L&G and PIC’s volumes reduced from their record levels last year, Aviva’s volumes more than doubled from £1.3bn in H1 2019 to £3.1bn in H1 2020.
- So far in 2020 there have been three transactions over £1bn. These were a £1.6bn buy-in by MNOPF with PIC and two £1bn buy-ins by the Co-op’s pension scheme with Aviva and PIC. This compares to twelve transactions in 2019 over £1bn as 2020 sees fewer giant deals.
- The MNOPF buy-in with PIC included the transfer of a longevity swap. A further longevity swap transfer was completed in May by the pension scheme of LV= as part of a £800m buy-in with Phoenix Life. These two transactions are part of a continuing trend, following the conversion of longevity swaps to buy-ins by the pension schemes of SSE, Allied Irish Bank and Rolls Royce in 2019.
- With fewer giant transactions in H1 2020, there have been greater opportunities for mid-sized transactions. In H1 2020 22 transactions between £100m and £500m were completed –double the 11 such transactions completed in H1 2019.
- To date in 2020 three longevity swaps have been announced, covering £12.4bn of liabilities (FY 2019: two longevity swaps totalling £7.8bn). The largest in 2020 is the £10bn longevity swap announced in January by Lloyds Banking Group which is also the second largest longevity swap ever in the UK.
Full underlying data and charts are available in the notes section below.
Charlie Finch, partner at LCP commented:
“At the start of the year we predicted buy-in and buy-out volumes would reach around £25bn in 2020. With £12.6bn transacted in the first half of the year, the market remains on track to reach £25bn. Unlike many industries the Covid-19 crisis has not reduced activity in this market.
“Indeed, the Covid-19 crisis has given rise to favourable insurer pricing for those schemes who could be nimble and move quickly. We helped several schemes take advantage of pricing opportunities fuelled by Covid-19 to secure benefits in full ahead of plan including a deal for nearly £930m with Littlewoods and a £610m deal for the Marathon scheme sponsored by RockRose Energy. Seasoned buyers also completed follow-on transactions such as the ICI Pension Fund who added £70m to their existing nearly £9bn of buy-ins through their umbrella contracts, a record 17th buy-in transaction.
Imogen Cothay, partner at LCP, added:
“Buy-in pricing has fallen back since April but continues to be at attractive levels. With some insurers having written less so far than last year we expect there to be pricing opportunities toward the year end, particularly for those schemes which can be nimble.
“Alongside the impact of Covid-19 we are seeing the development of capital-backed solutions which are providing new options for schemes considering their de-risking journey. This includes DB superfunds where there is increased interest following the guidance issued by the Pensions Regulator in June, particularly where schemes have a stressed or insolvent sponsor.”
So far in 2020 LCP has been lead adviser on £5bn of buy-ins and buy-outs to date across 20 transactions. This includes transactions for LV=, Littlewoods, ICI, 3i, GHG and Countrywide Farmers.
Notes to editors
Buy-in/ buy-out volumes in the UK by insurer:
|Total 2019 (£bn)||2019 share (rank)|
|1. PIC||3.5||28%||6.0||1.2||7.2||16% (3)|
|2. Legal & General||3.2||25%||6.3||4.0||10.3||24% (2)|
|3. Aviva||3.1||24%||1.3||2.7||4.0||9% (4)|
|4. Phoenix Life||1.1||9%||1.6||0.7||2.2||5% (5)|
|5. Rothesay Life||0.8||6%||0.7||15.6||16.3||37% (1)|
|6. JUST||0.5||4%||0.5||0.7||1.2||3% (7)|
|7. Scottish Widows||0.4||3%||0.8||1.3||2.0||5% (6)|
|8. Canada Life||0.1||1%||0.4||0||0.4||1% (8)|
Source: Insurance company data. Only buy-ins and buy-out with a UK pension scheme are included.
Note: Total columns and rows may not sum due to rounding
The chart below shows the volume of buy-ins and buy-outs since 2007 split by half year including a predicted further £12.5bn in H2 2020 to reach £25bn for the year. Further details can be found in the table below
|£bn||2007||2008||2009||2010||2011||2012||2013||2014||2015||2016||2017||2018||2019||2020 (H2 prediction)|
Source: Insurance company data. LCP prediction for H2 2020.
Buy-in and buy-out transactions over £100m in 2020 to date
|Insurer||Type of transaction||Date||LCP lead adviser
|Undisclosed||690||Legal & General||Full buy-in||Jan-20||✓|
|Xylem||255||Rothesay Life||Full buy-in||Jan-20|
|Undisclosed||115||Legal & General||Pensioner buy-in||Feb-20|
|Undisclosed||180||Phoenix Life||Pensioner buy-in||Mar-20|
|Leonardo Electronics||160||Just||Pensioner buy-in||Mar-20|
|Undisclosed||415||Scottish Widows||Pensioner buy-in||Mar-20|
|Undisclosed||205||Rothesay Life||Full buy-in||Apr-20|
|3i Group||650||Legal & General||Full buy-in||May-20||✓|
|LV=||800||Phoenix Life||Pensioner buy-in||May-20||✓|
|Undisclosed||100||Phoenix Life||Pensioner buy-in||Jun-20|
|Undisclosed||485||Legal & General||Pensioner buy-in||Jun-20||✓|
|IPC Media||290||Rothesay Life||Pensioner buy-in||Jun-20|
|Countrywide Farmers||100||Legal & General||PPF+ buy-out||Jun-20||✓|
|Undisclosed||520||Legal & General||Full buy-in||Jun-20|
|Littlewoods||930||Rothesay Life||Full buy-in||Jul-20||✓|
|RockRose Energy||610||Rothesay Life||Full buy-in||Jul-20||✓|
|Hitachi UK||275||Legal & General||Full buy-in||Aug-20|
|Siemens||530||Legal & General||Pensioner buy-in||Aug-20|
Source: Insurance company data for H1 2020 and public announcements.
Further data can be found in LCP’s De-risking Report 2020, “Finding certainty in uncertain times” available at www.lcp.uk.com/deriskingreport.