Small schemes driving force behind record buy-in/out activity in 2023
Pensions & benefits Pension risk transfer Risk
New analysis by LCP has highlighted that transactions under £10m were the driving force behind the record number (226) of transactions last year.
The chart below shows that the number of transactions under £100m more than doubled in the last three years, from 77 in 2020 to 162 in 2023. Buy-ins/outs between £10m and £100m contributed most strongly to the growth in activity seen over 2021 and 2022, but the growth in 2023 was almost entirely driven by deals under £10m.
In contrast, the number of mid-sized buy-ins between £100m-£1bn has been broadly static since 2020, and while transactions over £1bn more than doubled in 2023, they still made up a relatively small proportion of the overall number.
LCP believes the smaller end of the market will remain buoyant due to:
- Streamlined insurer processes making it easier for small schemes to access the market and more efficient for insurers to transact – four insurers now offer these.
- Well established and clearly structured streamlined adviser processes with pre-negotiated contracts, giving insurers confidence that transactions will go ahead efficiently – such as LCP’s streamlined buy-in/out service.
- Extra competition from two new insurer entrants intending to participate in the market from later this year with core appetite for buy-ins/outs under £100m – Royal London (primarily over £50m) and Utmost (under £100m).
David Stewart, Partner at LCP, commented: “It may surprise some readers that the record number of buy-ins/outs in 2023 was almost entirely driven by growth in transactions under £10m, which surged by over 50% last year. In 2024, we’re continuing to see a healthy and competitive market for small schemes, with recent LCP-led processes receiving multiple insurer quotations even for schemes below £10m. Our streamlined service has now completed 94 buy-in/out transactions, with 85% of processes since the beginning of last year receiving multiple insurer quotations.
“Insurers continue to have low tolerance for under-prepared schemes of all sizes when triaging transaction opportunities – with a focus on avoiding post-transaction costs and log-jams. The message to smaller schemes is that they can access highly competitive pricing but they need to be prepared and to work with a specialist adviser with a strong track record of completing deals.”