De-risking Report 2023

Welcome to WTW’s 2023 de-risking report in which a number of our experts look back at activity in the pension risk settlement market in 2022, consider some of the current key themes and share predictions for the year ahead.

The bulk annuity and longevity hedging markets continue to be busy with volumes in 2022 similar to those seen in 2021.  However, this does not take into account the much publicised, significant rise in gilt yields seen in the second half of the year which reduced the absolute size of pension scheme liabilities, therefore leading to smaller transaction volumes for the same populations on a like-for-like basis. In fact, after taking market conditions into account, 2022 is likely to be the second biggest year on record for the bulk annuity market.

The rising gilt yields, along with widening credit spreads (the additional return from corporate bonds relative to gilts), and improved longevity reinsurance pricing has resulted in some schemes seeing an improvement in buyout funding levels to the extent that buyout is now within reach much earlier than anticipated. We have therefore seen an increase in the number of full scheme buy-ins and this trend is expected to continue in 2023.

Our team is proud to continue to be at the heart of this market. In 2022, we supported trustees and corporates across all scheme sizes in navigating the market and achieving great outcomes for their buy-in, buyout and longevity swap processes. In fact in 2022 we led more deals than in any previous year – 25 transactions ranging in size from £900,000 to £5.5 billion! And with more schemes than ever planning to approach the market in 2023, our team is expecting to be very busy helping clients to achieve the right transaction for them.

WTW’s bulk annuity and longevity swap record over 2021/22 in numbers.

It is in this context that this report provides an overview of the market over the past year and our predictions on what we expect to happen in 2023. In addition, we highlight some topical issues we expect to be important to schemes considering a transaction, including:

• The drivers behind the current attractive longevity pricing
• What the recent market volatility might mean for schemes considering a buy-in transaction
• Working exclusively with an insurer to complete a bulk annuity
• Innovative solutions to overcome illiquid assets being a barrier to buyout
• Embedding member experience in the insurer selection process

We hope you find this an interesting insight into this growing market and would welcome the chance to discuss further with you how your scheme can maximise its opportunities to manage risks in the current environment.

Download the full report below.

Ian Aley
Head of Transactions, WTW