Evolved risk transfer landscape provides greater opportunity for small schemes

Smaller DB Pension schemes considering a bulk annuity transaction have more opportunities and flexibility than ever before so must carefully consider their broking approach, claims Hymans Robertson. The leading pensions and financial services consultancy explains that a growth in innovation from established insurers and rise in the number of providers in the market have rapidly changed the traditional broking dynamic. As a result, these small schemes are now able to attract greater insurer interest and have increased leverage to negotiate better pricing and commercial terms. It says that small schemes must recognise and embrace this change and approach the transaction with a renewed commercial mindset or they risk leaving money on the table.

Commenting on the growing momentum among small schemes, Iain Church, Head of Core Transactions and Risk Transfer Specialist, Hymans Robertson, says:

“We’ve seen more change in the small scheme end of the market in the past few years than in the decade before it. Where many trustees once faced limited insurer appetite, today they can access broader choice, improved pricing and more flexibility to tailor transaction structures to meet their specific needs. Innovation from established providers, combined with the arrival of new market entrants, has reshaped what’s possible. The effect is clear: more competition, more engagement and better outcomes for smaller schemes.

“This rapid growth means that even schemes traditionally considered too small to get quotes from multiple insurers now have more choice than ever before. Small schemes should embrace this changed dynamic and approach the buy-in and buy-out process with a commercial mindset to achieve the best they can for the scheme and members. By carefully considering their broking strategy, trustees can make the most of expanding insurer appetite, greater innovation and strong pricing conditions. Defaulting to a standardised process without carefully considering the market dynamics, and what insurer opportunities are out there, risks leaking value and could result in a poorer member experience. 

“In addition to increased competition for small schemes, we’re also seeing important developments in post buy in capabilities. Insurer investment in post transaction processes means some schemes can progress from buy in to buy out in single-digit months if data issues are resolved early. Others are introducing post buy in services that include data cleansing or GMP equalisation, reducing the administrative burden on trustees and providing certainty on buy-out timescales.

“With supply increasing and demand rising, smaller schemes that don’t fully consider the opportunities available in the market risk being caught in growing backlogs for buy out and higher scheme costs. Considering this early, using the right tools and getting specialist advice gives smaller schemes the best chance of securing strong outcomes for members and sponsors alike.”

Read more about the options for small schemes in Hymans Robertson’s annual risk transfer report, here.

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