Published in May 2022
There has been considerable response to last night’s blog Field called our DB pensions “an economic miracle”….Reeves knows why. It explains how a speech including a call to reinvest pension surpluses in company and economic growth.
It’s worth reading and if you haven’t read the blog, click this link– it was published last night to help the British public understand that the pensions that Field held to be a miracle only 20 years ago, are now being dismantled.
There is confusion in the pensions market with departments of major consultants arguing for and against the position taken by Chancellor Rachel Reeves.
While one team at Willis Towers Watson argued to Mary Mcdougall
Access to scheme surpluses could slow the pace at which pension funds have been offloading their pension obligations to insurance companies, with around £50bn of assets transferred in so-called bulk annuity transactions in each of the past two years, according to pensions consultancy WTW.
De-risking or re-risking? What’s going on?
WTW does so a few hours after predicting a tightening on pension buy-outs as the Treasury demands re-risking.
WTW suggests that higher surpluses will drive markets up from £50bn to £70bn and last year’s disappointing year for buy-outs was in readiness for a bonanza in 2025
Forecasts for a buoyant 2025 follow volumes that were slightly lower than predicted last year as some employers decided to keep their schemes or delay buyouts, in anticipation of higher surpluses.
I do not think the insurers were able to do what they want.
My suspicion is that the PRA are getting a little nervous about the reinsurance that is stoking the Bulk Annuity Market
It is generally accepted that capacity was limited by difficulties with the PRA over the offshore reinsurance market. The PRA is effectively a part of the Bank of England.
It may be that the Bank of England’s PRA, like the Treasury, are asking questions of the pensions industry with its trillion + in assets. Are insurers investing in long term sustainable growth?
The bottom line is that Pension Bulk Annuities do not reinvest into the sustainable growth of companies, they invest in global bonds and assets that fit the needs of their shareholders, not the sustainable growth of companies or the national economy.
And this brings me to the very real questions that the FT work (based on Sky’s) asks of the regulators. It brings to question the PRA’s leniency on the Pension Buy-Out Market. It asks question of the work of the Pension Regulator.
Rather than encouraging investment, growing Britain with the muscle of pension investment- specifically the strength of the £1.2 trillion that still sits in DB pensions, the regulators have handed the market to the insures
Despite predictions to the contrary, de-risking was actually down in 2024 on 2023.
Is Reeves condemning the “de-risking” of pensions.
It is not just the Bank of England and PRA who may be feeling a little nervous. There will be a certain amount of nervousness at those parts of TPR charged with helping DB plans manage risk (rather than put pensions to work).
One of our senior pension commentators, a man who has worked for many decades keeping DB pensions had this to say last night