Industry experts have predicted further innovation and development in the pension risk transfer (PRT) market in 2025, due to a “high demand” from pension schemes.

Aon indicated that this demand would lead to continued development and innovation in the bulk annuity market in the coming year.

Similarly, Broadstone said it anticipates that momentum for smaller schemes in the pension de-risking market will continue to build in 2025 due to a buoyant market, competitive pricing, and increasing insurer options at this end of the market.

In addition to this, WTW’s annual Pensions De-risking report also forecasted significant activity in the UK defined benefit (DB) pensions de-risking market, predicting £50bn in bulk annuity transactions and £20bn in longevity swaps in 2025.

Aon predicted that the total volume of bulk annuity business completed in the UK during 2024 is expected to be between £45bn and £50bn.

It also noted that improved pension scheme funding levels, mainly due to yield rises, have prompted increased demand for de-risking using insurance, from schemes of all sizes.

Aon noted that the insurance market is actively responding to this growing demand by introducing innovation and attracting new participants.

Broadstone head of trustee services, Chris Rice, said: “As we start 2025, we expect steady growth in the number of transactions for smaller schemes compared to last year with more insurers interested in smaller deals, combined with competitive pricing.”

Rice added that trustees and sponsors of small schemes can be confident of a successful transaction if properly prepared.

Aon UK risk settlement team partner, Mike Edwards, said the myths that the market was only open to mega schemes has been “dispelled” over the course of 2024 as there were various market changes that benefited smaller to mid-sized schemes.

Edwards said: “New market entrants, including Royal London and Utmost, completed their first deals below £100 million, while most of the established participants expanded their offerings at the smaller end of the market to give a better service via streamlined processes.

“We also expect at least one more new market entrant, with Brookfield currently seeking regulatory approvals.”

He said at the larger end of the market, deals over £1bn have become ‘business as usual’, with size no longer viewed by insurers as a particular challenge, demonstrating both the maturity of the market and the availability of capital to support continued growth.

However, Edwards said that large schemes often bring unique structuring challenges, including issues relating to schemes’ illiquid asset holdings and the insurance of complex benefit features.

“Each year, this market breaks new ground and paves the way for more schemes to achieve their future aims. We expect 2025 to be no different,” he said.

Earlier this month, the Prudential Regulatory Authority (PRA) noted that it continues to observe “rapid” growth in the UK bulk annuity market due to high demand from pension schemes.

It also stated its expectation that insurers should proactively and prudently manage their capacity to support continued market growth.

Aon risk settlement team senior partner, John Baines, said Aon fully supports this level of focus from the PRA.

“At a time when the market continues to enjoy significant growth, it is vital that appropriate controls are in place to maintain policyholder protection,” he said.

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