Almost £1trn of UK pension scheme liabilities will have been covered by insurers through bulk purchase annuity (BPA) deals by the early 2030s, with £50bn a year becoming the new normal, Hymans Robertson has predicted.

Speaking at Hymans Robertson’s DB Future Focus conference, its partner and head of risk transfer solutions, James Mullins, gave his early 2030s projections for the BPA market.

“Our own projections find that insurance could have covered close to £1trn of liabilities in the not-too-distant future, insuring liabilities for well over six million people in the UK,” he stated.

Mullins highlighted how 2024 has been a busy time for the BPA market already, with Hymans Robertson already having advised on £3bn worth of transactions in January and February, despite them usually being “relatively quiet months”.

“Looking at the pipeline more generally in the market, there are 15 schemes well over £1bn plus in size coming to the market over next few months, looking to fully insure their pension scheme. That group alone adds up to £30bn.

“You then add to that the very large cases that are out there and the flow of small and medium sized transactions that are always busy, and we are in for an enormous 2024 and beyond. We think £50bn or more each year will become normal year on year,” he added.

Mullins stated last year’s total BPA transactions was around £50bn “and if you compare that to when interest rates were a lot lower prior to 20222, that would have been more like £75bn”.

These high volumes will create bottleneck challenges, he warned, giving the example that “one insurer from the summer onwards last year would not quote on anything that was less than £1bn, and that included some large FTSE100 companies, as it just did not have the capacity to quote on all cases. That’s pretty staggering and a real shift from a few years earlier”.

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