James Mullins, Head of Risk Transfer responds to the findings of the April edition of our Buy-in Monitoring Service.

Commenting on pensioner buy-in pricing, he said:

“Pensioner buy-in pricing continues to be cheaper than gilts. We saw schemes that were in a position to transact being able to take advantage of some particularly attractive pricing at the end of 2016. This was driven in part by some insurers looking to meet business targets following a slower start to 2016 as the market implemented the new Solvency II regulations. There continue to be some attractive opportunities available in 2017, and pension schemes are still able to complete a buy-in for less than the value of gilts held to back the same pensioner liabilities.”

On the implications of Solvency II to pricing, James added:

“Insurers’ pricing is becoming much more sensitive to the specific assets they use in their reserves to back a particular transaction. This is driving a wider range of buy-in prices than we typically saw before Solvency II. We’re seeing that prices on specific transactions can shift materially as different assets become available. This means it is more important than ever for pension schemes to have accurate benefit data loaded onto the insurers’ systems, as this gives them the clearest possible picture of the best price available at any time, as well as giving them the opportunity to capture pricing improvements as they become available.”