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Survey Report

The dynamics of a busy bulk annuity market

De-risking report 2024

By Greg Robertson | January 24, 2024

There is unprecedented demand for bulk annuities, reflecting improved funding levels and attractive pricing. The market is more dynamic and competitive than ever before. Greg Robertson reflects on the latest trends and explains how pension schemes are adapting to best position themselves in a busy market.
Retirement|Pension Board and Trustee Consulting|Pensions Corporate Consulting|Pensions Technology

Can the market cope with the expected levels of demand?

There is around £1.3 trillion[1] of defined benefit liabilities in the UK. Only around 15%[2] of those liabilities have been insured via bulk annuities to date, despite the record volumes in 2023. With lots of schemes expected to reach their long-term funding goal in the coming years, we are anticipating a further uptick in demand, notwithstanding the potential Mansion House reforms which will influence the desired endgame for some. A conservative estimate would be a further £500bn of bulk annuity transactions over the next five to ten years.

So can the market cope with this? Well the good news is that capital is not a constraint. The insurers were anticipating higher volumes, in monetary terms, in their business plans, and they sourced capital accordingly. That, coupled with the high interest rate environment, means that the insurers have lots of spare capital ready to deploy. As of 31 December 2022, the nine bulk annuity insurers collectively held nearly £30bn[3] of excess capital over and above their solvency capital requirements. Some of that was in anticipation of a stellar 2023, and it will have been used to write new business, but we still anticipate significant headroom when the insurers release their 2023 year-end positions. The Government’s proposed reforms to the regulatory regime (in the form of Solvency UK) may release further capital to write new business. Over the medium term, the existing insurers have the support of their investors to continue to grow their businesses, and most of their backbooks are now of sufficient size that they are generating surplus capital each year that can be used to write more new business.

As Sarah highlighted, 2023 saw a new entrant in the shape of M&G and we expect a scaling up of their appetite over the coming years. There are others looking closely at entering the market too, all of which will provide additional capacity in the coming years.

The real constraint for the insurers is people. Each transaction needs to be priced, often by multiple insurers, transacted and then onboarded, with each stage requiring specific expertise. The pricing stage in particular can be very resource intensive, similar to a pension scheme’s first funding valuation, but with the added pressure to complete it within a six-to-ten-week window. The insurers are looking to meet this challenge by scaling up their teams, but there is a limited pool of experienced individuals to recruit from, and their efforts to train new colleagues will take time to bear fruit.

There are also pressures on the adviser side, particularly at administrators. On top of their business-as-usual work, a bulk annuity transaction often requires administrators to complete significant amounts of data cleansing and to provide additional data extracts that meet the insurers’ requirements. They are also currently grappling with GMP equalisation and the requirements of the pensions dashboard programme. From a transaction perspective, it is vital to secure resource ahead of time and to focus the administrator’s efforts on tasks that really matter.

Market intelligence tells us that there was capacity for over £60 billion of bulk annuity transactions last year. So, despite the surge in demand, there was still capacity for more than the c.£50 billion that was written. It is reassuring that current constraints have not yet got to the stage where schemes are unable to transact. However, should demand continue to increase, that could become the case, particularly for smaller schemes. In practice, we think this is highly unlikely as we expect insurers – both current and prospective – to react to take advantage of a highly attractive business opportunity in a thriving market.

How should pension schemes react to best position themselves in the market?

The insurers all reviewed their strategic priorities over 2023 and specifically the profile of transactions that they choose to quote on. The level of demand has allowed them to be far more selective and prioritise cases where they think they have the best chance of winning and where they perceive there to be a smoother path towards execution. This latter point encompasses both the level of preparatory work undertaken by the trustees, and also the design of the quotation process.

The former point – that insurers are only quoting on deals where they perceive they have the best chance of winning – sometimes causes initial concern from our clients that they may not get the best possible pricing. In fact, what’s happening is the insurers are just ruling themselves out of processes where they know they won’t be able to offer attractive pricing – for example if they know that their pricing for heavily pensioner portfolios has been less attractive in recent months. This means that the quotation process can be more focussed on those insurers who are likely to offer the best price from an earlier point.

You may hear about the insurers’ ‘triaging’ processes. In other words, the insurers working through the requests that land in their inbox each week and identifying which cases to quote on considering their strategic priorities and resource constraints. It is important for trustees to understand what drives those decisions and, where they can, remove any barriers to an insurer’s participation. We recently held research sessions with all of the insurers to discuss their triaging processes at length. The key themes from those discussions are summarised in our top tips to demonstrate transaction readiness.

Top tips to demonstrate transaction readiness

  1. 01

    Data and benefit preparation pays off

    We heard from the insurers that the general quality of member benefit data has deteriorated, perhaps as some schemes have rushed to get to market. Schemes can stand out from the crowd by spending time to get the key data right and presenting it in a format that does not require manipulation. At WTW, we also undertake an independent review of your data and benefit specification to ensure they are consistent and speak the same language. We hear that is not always the case.

  2. 02

    Identify and focus on what really matters

    We don’t issue long lists of ‘nice to haves’ with our quotation requests. Understandably in a busy market, that approach gets a generic response and the points that are important get lost. We recommend, and the insurers prefer, a proportionate list of key legal terms that are specific to each client. This approach ensures the maximum traction on the points that matter.

  3. 03

    Flexibility on timescales helps

    The insurers respond well to some flexibility on the timing of initial quotations, particularly for smaller deals. This allows them to fit the pricing work around their wider resource availability.

  4. 04

    It is important to demonstrate certainty of execution

    If insurers are to commit precious resources, they want to see a clear timetable, with evidence of a governance framework that will facilitate agile decision-making through the transaction. For full scheme transactions, evidence that the trustees and sponsor are aligned is also important.

  5. 05

    The insurers expect a plan for illiquid assets

    For some schemes, illiquid assets can be a barrier to the transaction going ahead. The insurers now expect a clear plan to be communicated when approaching the market - see Gemma Millington’s article: Do pension scheme illiquid investments present an insoluble issue? later in this report.

  6. 06

    Agree your residual risks strategy up-front

    For larger transactions, the bulk annuity policy can be widened to include certain residual risks, such as the risk of data or benefit error. For some schemes, this is a valuable extension. However, as Sadie highlights in her article: Managing your scheme’s risks through to buyout later in this report, it does come at a cost, and it adds significant complexity to the process, including for the insurer. At WTW, we recommend planning for residual risks early in the process, including an assessment of whether additional cover will provide value-for-money.

What should the quotation process look like?

With a hugely competitive market, a key decision for trustees and sponsors is how to engage the insurers, and specifically the quotation process that they choose to run. There is no ‘one size fits all’ strategy. Instead, the market approach should vary depending on scheme circumstances and in particular size, complexity and the trustees’ and sponsors’ objectives. Having a transaction adviser who has experience of the current market, thinks strategically and is in close contact with insurers is critical to designing a process that will optimise the outcome.

Over 2023 we led processes with each of the following designs:

  • A ‘traditional’ full market process with multiple pricing rounds
  • Pre-selecting a panel of insurers based on non-price factors and then running a competitive pricing process
  • A single pricing round with multiple insurers; and
  • Selecting one insurer to partner with (often referred to as ‘exclusivity’ or a ‘strategic partnership’).

A key part of our consulting process is to help clients understand the pros and cons of the different options and where each has been successful in the past.

The pros and cons of a sole insurer process

Perhaps unsurprisingly given their resource constraints, there has been an increased push from some insurers for exclusive processes. We see a place for sole insurer processes in certain circumstances, but we strongly believe they should be a tactical decision for trustees and sponsors having considered the alternatives.

The pros and cons of a sole insurer process
Pros Cons
For schemes with an existing buy-in, it may be preferable to insure all members with one insurer There is no ‘traditional’ competition.  Harder to demonstrate to all stakeholders that optimal pricing has been achieved.
It may be easier to accelerate timescales (e.g. to take advantage of market conditions). There could be a significant delay if the chosen insurer is unable to provide a competitive proposal
An insurer may be more willing to develop innovative solutions to address transaction barriers such as illiquid assets or benefit complexities  

In our experience, depending on a scheme’s circumstances, for some the outcome of sole insurer processes can be as good, and in some cases better, than if a competitive process had been undertaken. This is both in terms of price and the wider commercial package. The key is to make the insurer work hard to justify the exclusivity – be that through assurances on the attractiveness of the pricing they have offered, or perhaps through offering particular legal terms. Having an experienced adviser, with access to a database of pricing and terms from across the market, is vital to keep the selected insurer honest.


As we enter another busy year in the buy-in and buyout market, pension scheme trustees and sponsors will need to monitor market dynamics and consider the appropriate approach to both their preparatory and market engagement phases. We look forward to partnering with our clients to help them achieve the best outcomes.


  1. PPF Purple Book,” 2023. Return to article
  2. WTW estimated based on bulk annuity volumes to date utilising WTW led transactions, announcements in the pensions news and insure reports. Return to article
  3. Insurer’s solvency and financial conditions reports,” 31 December 2022. Return to article

Greg Robertson
Director, GB Transactions
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