Pension Risk Transfer
in the UK, US & Canada

Issue 4: March 2024

Pension Risk Transfer in the UK, US & Canada

2023 was a record (or near record)-breaking year in the Pension Risk Transfer (PRT) market on both sides of the Atlantic.

In the UK, 2023 was a year of records and firsts – with a record estimated £50bn of transactions completed during the year and the first ever UK pension superfund deal completed.

In the US, 2023 witnessed the third largest ever “jumbo” deal and a near-record year of total transactions completed.

In Canada, 2023 saw the total market value volume exceed $7bn for the third year in a row, far exceeding pre-2021 levels which had previously been rising unspectacularly to around half the current levels.

In this article, as well as looking back on the pension risk transfer market in 2023, I also outline what to look out for in 2024, including already-announced jumbo deals in the US and Canada, and rumours of up to six new entrants in the UK.

Country-specific analysis

Click on the flags below for a country-specific review of 2023 and what to look out for in 2024…

UK: 2023 - A YEAR OF RECORDS & FIRSTS

2023 was a year of records and firsts for the UK PRT market.

RECORD: Total market value volume hit an estimated £50bn making 2023 a record year (beating the previous record in 2019).

RECORD: In February, PIC concluded buy-ins with the trustees of two schemes sponsored by RSA Group, totalling £6.5bn – the largest UK transaction to-date.

Pension scheme	Size £bn	Provider
RSA Group (2 schemes)	6.5	PIC
Boots Pension Scheme	4.8	L&G
Co-operative Pension Scheme	2.7	Rothesay
British Steel Pension Scheme	2.7	L&G
Thales UK Pension Scheme	2.7	Rothesay
United Utilities	1.8	L&G
Safeway Scheme	1 .4	Rothesay
Mitchells & Butlers	1.1	Standard Life
Chubb Pension Plan & Chubb Security Pension Plan	1.0	Standard Life
Thomas Cook Pension Plan	0.9	Aviva

RECORD: In May, the £7.5bn British Steel Pension Scheme became the largest pension scheme in the UK to fully insure all its members’ benefits, with the latest £2.7bn buy-in deal being the last in a series of four transactions with Legal & General.

FIRST: In September, M&G (formerly Prudential) re-entered the bulk purchase annuity (BPA) market with its first transactions – including one of its own pension schemes – taking the number of BPA insurers in the UK up to 9.

FIRST: In November, the £590m transaction between Clara and Sears Retail Pension Scheme saw 9,600 members become the first to enter a UK pension superfund. Administration of the Sears scheme will continue to be undertaken by Isio.

Who administers the insurers’ schemes after buy-out?

Only 2 of the 9 BPA insurers administer in-house (L&G and Aviva), however this still makes up 40%¹ of the administration of schemes transferred to a BPA insurer. Capita (mainly via PIC) and Aptia provide the largest share of outsourced pensions administration.

¹ BWD estimate (based on total market volumes insured since 2009)

2024 OUTLOOK:

The expansion of the UK PRT market looks set to continue in 2024 & beyond.

WTW’s annual pensions de-risking report predicts that 2024 will see £60bn worth of bulk annuity transactions – exceeding last year’s total of £50bn. In its report, WTW’s Director, Jenny Neale, says: “…[the key insurers] also note that there is the potential for the biggest deal ever in 2024 – perhaps reaching double digit £bns for a single transaction for the first time…”

Commenting after the first Clara superfund transaction in November 2023, Dev Gandhi, Senior Consultant at LCP said: “…We estimate that there could be £5bn or more of further superfund transaction in the next few years and expect to see new providers and similar solutions entering the market…”

And finally, rumours are circulating of six UK life insurers seeking to enter the UK BPA market – none of which have previous involvement within the sector and instead fall into three categories: existing UK life insurers that write retail annuities; overseas insurers that write annuities (with no current UK presence); and private equity-backed insurers. BWD has become aware of the three insurers most likely to break into the market in 2024 – Royal London, Utmost and a UK life insurer (confidential).

UNITED STATES →

← CANADA

US: 2023 - IN NUMBERS

$45bn estimated total market value volume transacted in 2023 was the second largest on record in the US – behind the $51.9bn secured with insurers in 2022.

$8.1bn transaction between AT&T and Athene in May was the largest deal of 2023 – covering 100,000 participants – and was the third largest transaction in US PRT history.

21 insurers in the US PRT market including 3 new entrants who joined during 2022 – Global Atlantic, American National and Reinsurance Group of America (RGA).

2024 OUTLOOK:

L&G predicts two jumbo transactions will close in Q1 2024, including the recently announced $4.9bn Shell USA Inc. transaction with Prudential Insurance Co. of America (a subsidiary of Prudential Financial, Inc). L&G forecasts: “…these transactions should make it the largest first quarter ever at an estimated $15bn – easily surpassing the previous Q1 record of $6.3bn in 2023…”

CANADA →

← UNITED KINGDOM

CANADA: 2023 - IN NUMBERS

$7.6bn estimated total market value volume transacted in 2023 was close to the record of $7.8bn in 2022 (and previous record of $7.7bn in 2021).

9 insurers in the Canadian PRT market – Assumptions Life, BMO, Brookfield Annuity, Canada Life, Co-operators, Desjardins, Industrial Alliance, RBCI and Sun Life.

2024 OUTLOOK:

In February 2024, Ford of Canada agreed a $923m buy-out transaction for over 2,700 members who will transfer to RBCI, Sun Life and Desjardins. Advising on the transaction, Marco Dickner, Canadian Retirement Risk Management Leader at WTW, said: "…This transaction is part of a growing trend in the [Canadian] private sector, where plan sponsors can protect pension benefits for plan members and eliminate risk for the companies…”

UNITED KINGDOM →

UNITED STATES →

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Interested in discussing this further?

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Rob Hammond

Partner

UK: 07704 361754

US/CAN: +1 (347) 305 2585

rob.hammond@bwd-search.com

Harry McNeill

Divisional Manager

UK: 0113 426 0777

US/CAN: +1 (347) 305 2585

harry.mcneill@bwd-search.com

Tom Craske

Consultant

UK: 07458 163 276

US/CAN: +1 (347) 305 2585

tom.craske@bwd-search.com

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