Strong activity levels and improved communications for members at-retirement in the bulk purchase annuity (BPA) market are set to continue in 2025, according to industry experts.

Aon stated that the trend of BPA insurers improving options available to members and giving access to independent financial advisers (IFA) at-retirement will increase next year.

The consultancy noted that the tendency for defined benefit (DB) schemes to provide options within the scheme and IFA advice had become “well-established” in recent years, with 40 per cent of schemes expecting to provide IFA support by the end of 2025.

This year also saw more BPA insurers developing their thinking in this area, according to Aon, at a time when improved funding levels have meant that more schemes were planning an approach to the insurance market.

“Historically, schemes might have taken it as given that some of the improved support and additional options available to members at retirement would fall away at buyout,” stated Aon UK partner and head of member options and support, Kelly Hurren.

“But now, trustees are increasingly asking if it’s possible to keep these benefits. In our conversations with them, their unanimous feedback was on the need to focus discussions more heavily on the member experience - and for it to be front of mind for schemes ahead of approaching the insurance market.

“But in 2024 we’ve really started to see insurers develop their thinking in this area. Our survey at the start of the year showed that half the insurers in the market would consider making options at retirement available. One insurer has gone on to announce that they are offering IFA advice to policy holders after buyout. Professional trustees have also welcomed this development.

“It’s relatively early days on this – but it’s a development we are pleased to see. In our view, it’s a movement that will really kick on, to the extent that it will be the biggest change in the member options and risk settlement space next year.

“We know a number of large insurers are seriously considering options for offering IFA support post-buyout, so you can expect this area to continue developing - there will be other insurers to follow.”

Meanwhile, Standard Life managing director of DB solutions, Kunal Sood, said that 2024 had been another strong year for the BPA market, with activity levels “showing no signs of slowing down”.

Transactions of over £1bn had become increasingly commonplace in 2024, with eight being announced publicly to date this year.

“Larger transactions can create interesting dynamics for the market, with opportunities for schemes with nimble governance structures that are able to react quickly to an evolving and shifting landscape over time,” Sood stated.

This year also saw governmental and regulatory activity relevant to the DB market, such as the new DB Funding Code, which Sood said would see trustees and sponsors needing to collaborate to develop formal journey plans that target de-risking and full funding on a low-risk basis.

“Funded reinsurance remains a focus within the industry,” Sood continued. “With the Prudential Regulation Authority (PRA) releasing its Supervisory Statement focused on the use of funded reinsurance, 2025 will see the launch of the next industry-wide stress test which will test these exposures as well as insurers’ resilience more generally.”

Sood noted that while price continued to play an important role, Standard Life expected to see more emphasis on wider considerations in 2025, including ESG credentials and cyber security.

Furthermore, advancements in artificial intelligence (AI) had led to “plenty of industry discussion” on its potential benefits, with Standard Life forecasting the focus on technology to continue next year.

“While it remains early days in terms of adoption across the DB market, but it will also be interesting to see how the market responds and the extent to which AI may gradually be adopted to the benefit of schemes and their members,” Sood concluded.

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