COVID-19: considerations for pension scheme risk transfer
24 Mar 2020
With the continued development of COVID-19, we look at some of the implications for UK pension schemes who are considering transferring risk to insurance companies through buy-in, buy-out or longevity insurance.
Schemes will have already seen volatility in their assets, with significant falls in rates and widening of credit spreads, coupled with equities falling back to levels not seen since 2011. Schemes who are well hedged may have seen their funding position hold steady, but this will not necessarily have immunised them against movements in buy-in and buy-out pricing.
Download our full publication where we consider, in detail:
- Insurer pricing;
- Capacity; and
- The longevity impact.
For schemes who are well progressed towards longevity insurance, there would appear to be compelling reasons to pause and wait until the impact of COVID-19 is better understood.
For buy-ins, the market conditions could create favourable pricing opportunities for schemes, though schemes will need to consider whether these outweigh the challenges in longevity pricing, or if longevity can be dealt with by deferring the point at which this risk is passed to the insurer.
If you have any questions about anything covered, please don't hesitate to get in touch.