Half of all the UK’s £2 trillion private sector DB pension scheme liabilities are expected to be insured by the end of 2031 according to Hymans Robertson.
Publishing its annual risk transfer report, the pension consultants said over the past 15 years there had been a huge increase in the number of schemes using bulk annuities and longevity swaps to reduce risk for their members. It predicts that this trend will continue and accelerate.
It report shows that £1/3 trillion of pension scheme liabilities has already been insured, covering 1.4 million members’ benefits. Half of this insurance — equivalent to more than £150bn — has been put in place in just the last three years.
Hymans Robertson partner and head of risk transfer James Mullins says: “The rapid growth in demand for pension schemes to insure their risks, along with improved pension scheme funding levels, attractive insurer pricing and new alternative risk transfer options, means that we expect that within 10 years those figures will grow materially.
“To the extent, we believe, that £1 trillion of pension scheme liabilities will have been insured, covering 5 million members’ benefits. That’s half of all of the UK’s private sector DB pension scheme liabilities.
“Pension scheme members in the UK will see a material shift over the next 10 years. Up until now, their pensions have managed, and paid, by a group of trustees, linked to their previous employer. Going forwards, their pensions will be increasingly managed, and paid, by insurance companies.
“Removing the link between their pension and previous employer will feel like a significant change to many members and so needs careful communication to set out the benefits. Five million, or more, individuals will increasingly look to the UK insurance regime, with oversight from the Prudential Regulations Authority and the FCA, to protect their pensions going forwards.”
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