The first half of 2024 saw a record number of bulk purchase annuity (BPA) deals completed, driven by a “surge” in smaller transactions, analysis from Aon has revealed.

Aon’s Risk Settlement Bulletin showed that 133 BPA transactions were written in H1 2024, with a total of £15.1bn in pension liabilities transferred.

More than eight in 10 (83 per cent) of the BPA deals in H1 were sub-£100m, amid improved scheme funding levels and streamlined broking processes.

Aon noted that several insurers had developed their own ‘streamlined’ broking processes to quote on smaller transactions in volume and the industry as a whole was now more comfortable with transacting these kinds of deals.

Furthermore, recent new players in the market, such as Royal London and Utmost, were entering the BPA market, focused on providing support on smaller cases at volume.

Aon said it expected the smaller end of the market to continue to be dynamic as insurers “flex their appetite” in response to wider objectives, such as the volume of business they are writing at larger transaction sizes.

It had also observed some insurers now providing quotes for schemes of all sizes on the basis the transaction will be completed in early 2025, having already filled their target volume of business for 2024.

Furthermore, one insurer had reduced the minimum transaction size it will quote on due to having additional capacity for smaller deals.

Despite these streamlined processes, illiquid assets remained “a concern” for pension schemes approaching endgame, especially those considering securing benefits with an insurer over the next few years, Aon stated.

“Many illiquid assets held by pension schemes are not suitable for passing to insurers as a method of meeting the premium for a buy-in transaction,” the report said.

“Therefore, many schemes need to find a solution ahead of completing a transaction. Managing the exit strategy of these illiquid assets comes with its fair share of challenges and finding the right implementation route to maximise value and reduce cost is a complex task.”

Aon also found that BPA pricing had remained stable in 2024, although there was “potential for volatility” in the remainder of the year amid continued high activity and geopolitical uncertainties.

“The bulk annuity market shows no signs of slowing down however and we expect 2025 to remain very busy with many schemes already planning auctions for Q1,” the report concluded.

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