There is “more that could be done” in terms of efficiency and effectiveness in the risk transfer process, the Society of Pension Professionals (SPP) has stated, despite numerous developments in this area over recent years.

The report, Less friction, better transfers: creating a more agile risk transfer process, noted that the UK bulk annuity market has continued to go from strength to strength, and targeting an insurance transaction remains an attractive option for many.

Citing data from WTW, the SPP highlighted that the UK defined benefit (DB) pension derisking market saw transactions of under £48bn in 2024 and more than £49bn in 2023, and it is widely expected to again reach around £50bn of transactions in 2025.

The report also said it was clear that insurers had responded well to increased demand for quotes and provided greater capacity, particularly for smaller schemes.

Indeed, it said streamlined processes from insurers are working well in allowing greater volumes of activity, and well-prepared schemes rarely fail to obtain a quote, allowing all-sized schemes access to competitive quotes in the market.

The SPP also highlighted the entrance of new insurers in the market, which it said will help provide additional capacity, along with innovations that come through increased competition.

Despite the rise in the number of transactions and insurer advancements, the report identified that differences in data and information requirements between insurers can be a challenge, as can differing approaches between trustees for reviewing insurer proposals, placing pressure on schemes and advisers. 

In particular, the report highlighted differences in templates and contractual terms and that it should be feasible to achieve greater standardisation in these streamlined processes through cross-industry collaboration.

The SPP also suggested administrative capacity constraints as a challenge faced in the risk transfer process, as it noted that fast-paced growth in the bulk annuity market has exacerbated already stretched administrative capabilities.

It said delays during the data cleanse period, on either the existing provider or insurer side, are at risk of creating a bottleneck of schemes that are unable to move to buyout.

However, the report outlined solutions for these challenges, including the standardisation of insurer processes, involving administrators on administration capacity constraints early in the process and data exercises.

The report suggested pension schemes and their advisers could improve their processes and develop innovative solutions to improve efficiency.

The SPP stated that overall, there is scope to increase efficiency in different parts of the risk transfer process, but stressed that it is “very important” to consider the whole process, including the post-transaction phase and the journey to buyout.

Commenting on the report, SPP Risk Transfer Group chair, Steve Hitchiner, said: “Overall, there is no single party holding up the process, but rather a combination of issues and challenges that impact insurers, trustees, advisers, and administrators differently.

"It’s no good saving time and resources on one part of the transaction if that simply leads to increased time and resources being needed elsewhere.”

Given this, Hitchiner said that for the risk transfer process to improve, all interested parties need to work on their issues, whilst simultaneously working collaboratively with associated partners in the process. 

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