Thanks to Martin Richmond of Professional Pensions and Charlie Finch of LCP for giving us a heads up on the shift towards insurance in 2025.
Bulk Purchase Annuities are being exchanged for the assets of small DB pension plans but the market for larger £1bn + funds has dried up.
BPA market sees record activity levels in H1 2025
LCP finds total market volumes expected to exceed £40bn for third year running
For small schemes there are more insurers and attractive terms for employers and their trustees.
The consultant’s analysis of insurance company data revealed 155 buy-in/buyout transactions were completed by defined benefit (DB) pension schemes in the first six months of the year. It said 2025 is on course to reach 350 transactions by the end of the year, and total market volumes are expected to surpass £40bn for the third consecutive year.
The firm noted the 155 transactions completed in H1 2025 represented a 20% increase compared to H1 2024, which saw 133 transactions.
But the amount transferred to insurance companies is likely to be down. LCP said buy-in and buyouts valued at under £100m accounted for the majority (85%) of all transactions completed in H1 2025, compared to 78% for the entirety of 2024.
Despite the record level of activity, LCP noted total buy-in and buyout volumes in the first six months of 2025 fell to their lowest levels since 2021 at £9.7bn, falling from £15.2bn and £21.1bn in H1 2024 and 2023 respectively.
Source LCP.
Just and PIC have new owners in American Private Equity Companies. L&G has a partnership with Blackstone , Utmost also have American ownership, Blumont are American.
Aviva, Royal London and Standard Life lead the UK insurers by public recognition. M&G is a reorganisation of Prudential and Rothesay likewise is a finance house creation of recent times. Martin Richmond writes
Elsewhere in the market, LCP stated Clara Pensions’ completion of its fourth DB superfund transaction with the Church Mission Society Pension Scheme was an “innovative” transfer which demonstrated a situation where a DB superfund could be a suitable endgame option.
While it is hard to write “no business” as a story, there is a conspicuous lack of consolidation in the Superfund market. There are several players who have been active in prospering in the first half of 2025 but there is no sign of a breakthrough and this is a disappointment.
The superfund model still struggles with a business model that doesn’t involve a transfer of consolidated schemes to insurers for Bulk Purchase Annuities as the sole means for the superfund to make its money.
So long as superfunds struggle with the lack of a credible means to be commercial in the longer term, it is hard to see superfunds achieving anything but feeders to the insurers tabled above.
Let’s hope that soon we’ll see these small schemes “buying in” insurance actually allowing the insurers to take over by “buying out”. It looks right now that there are conflicts of interests between the consultants , paid trustees, administrators and other professionals who want clients and employers who want rid of the expense of sponsoring pensions that are destined to insurers.
The problems faced by BPA insurers with smaller schemes is the administrative burden is proportionately higher and with pricing under pressure from market movements and increased competition, the sales proposition is increasingly challenged. Also Employers are increasing concerned with the risk analysis of the chosen insurer for what is an irrevocable transaction but one that doesn’t completely let them off the hook for the deferred remuneration promise to their former employees.
I understand that the Church Mission Society has given Clara some guarantees to allow them to take over the sponsorship of the Scheme and provide the additional capital required (it does seem to more of a joint sponsorship transactions than a consolidation).
For other smaller companies the joint sponsorship consolidation model may prove more attractive than a bulk annuity purchase requiring an additional cash injection from the Company to complete.