A number of new insurers are expected to enter the bulk annuity market, attracted by the record-breaking numbers and volumes of transactions. New entrants give more power of choice to trustees, but also raise some questions, says Hymans Robertson. Transaction records in the risk transfer market are expected to be broken in 2023 and the years to come. The leading pensions and financial services consultancy emphasised that the opportunities brought by such strong demand are attracting the attention of insurers that are not already in the market. M&G re-entered the bulk annuity market in 2023, making it the first new entrant since 2017*.
Commentary on Chancellor Jeremy Hunt's Autumn Statement 2023.
Commenting on the Chancellor's British Business Bank pensions investment plan, Alison Leslie, Head of DC Investment, Hymans Robertson, said:
“Whilst we welcome initiatives which expand the investment universe and support savers, it will take some time for the initiative to be commercially viable for many pension arrangements. Over time however we think this is a welcome addition to the universe of investments available for DC savers focusing specifically on the UK. If the investment case stacks up, like any investment, it would in time be considered as part of the investment universe but the rationale and returns have to bear fruit.”
Experts from Hymans Robertson comment on what they hope the Government will say about pensions in the Autumn Statement, especially as the Mansion House Reform consultation responses are expected to be published and TPR’s DB Funding Code confirmed:
"Now is the time to reflect on longer term policy strategy that would intergenerationally reconnect the UK’s immense store of pensions wealth, so it delivers pension promises, supports current workers and builds societal prosperity. There is a major societal opportunity here, which needs the right policy support and we suggest the establishment of a commission to look at these issues...
The health of UK DB schemes has reached a positive turning point, according to analysis by Hymans Robertson of DB pension schemes submitting valuations in 2022. The leading pensions and financial services consultancy’s Pension Scheme funding: Benchmarking Analysis report shows that the number of schemes in surplus increased significantly from the previous year (27% to 39%), recovery plans continue to shorten (now on average less than 6 years) and funding bases strengthen.
Widely held beliefs about the obstacles of moving a DC pension scheme to a new provider are ‘mythical’ barriers and can be simply debunked, claims Hymans Robertson in a new paper Debunking the myths of moving pension arrangements. The paper looks at three common misconceptions: that providers all offer the same thing, that once a scheme is in a master trust or contract-based arrangement it doesn’t need to change again, and finally, that it is really complex and time consuming to change providers, and challenges each of them. The leading pensions and financial services consultancy says that these should not be barriers. Instead, it’s good practice for employers to review their provider every three years and be open to change. This will make sure what the provider offers continues to align with their objectives and best meet the needs of their members. Changing provider, in some cases, may be the best option.
Well over a third (40%) of DB scheme sponsors don’t claim to be familiar with what the Pension Schemes Act 2021 requires regarding their company planning, financial activity, and compliance, according to research by Hymans Robertson.1 Yet, nearly two thirds (61%) say that recent corporate activity has been impacted by the Act and 29% of respondents see complying with the 2021 Act as a key challenge for their DB schemes over the next three years. The leading pensions and financial services consultancy warns that more education is needed to raise awareness of how the requirements could or should affect their company, including on the implications to dividend policy and corporate strategy.
“We are really pleased to see Clara and the trustees successfully complete their first transaction. This is a positive day for members of the transferring scheme. They’ll benefit from the additional loss absorbing capital provided by Clara’s backers which will be locked away until Clara delivers on its “bridge to buy-out” promise to insure benefits in full in the future. In line with TPR’s guidance, the trustees of the transferring scheme will have carefully considered a range of strategies and concluded that the transfer improves the likelihood of members receiving full benefits...
Commenting on today’s Bank of England interest rates hold, Chris Arcari, Head of Capital Markets, Hymans Robertson, said:
Nadeem Ladha has joined the Risk Transfer team at Hymans Robertson, the leading pensions and financial services consultancy, as a Senior Advisor on a short-term contract focusing on risk transfer projects involving special situations. Prior to joining the team, Nadeem was a senior Professional Independent Trustee at a professional trustee firm, where he specialised in leading pension schemes through risk transfer transactions. He had previously been at Hymans from 2005 to 2011.
Almost half (48%) of DB scheme sponsors intend to buy out, but 45% of those sponsors are worried about a lack of insurer capacity or interest, research by Hymans Robertson has found.1 With nearly all (95%) of those scheme sponsors intending to buy-out projecting they’ll do so within 10 years, the leading pensions and financial services consultancy says that companies should keep their options open for new value creation opportunities. These may come from new market solutions or the recent Mansion House reforms. However, most companies are unclear about how those solutions or government policy may impact the detail of their pension strategy...