UK pension risk transfer market volumes have reached “cruising altitude”, with 2024 expected to end a little below the 2023 record of £49.1bn, LCP analysis has found.

Despite buyout funding levels and demand for insurance remaining high, LCP estimated that increased interest in longer-term run-on and alternative endgames would have a smoothing effect on demand, with volumes averaging broadly 2024 levels over the next decade.

However, the firm acknowledged this could see some upside driven by the endgame decisions of the largest schemes.

Furthermore, LCP estimated that insurer capacity has expanded enough that it could comfortably support over £50bn of annual new business at competitive pricing.

It credited this increase to new business resource, previously a key insurer constraint, which has improved due to established insurers increasing operations and streamlining their processes, as well as three new insurers entering the market, with potentially one more to follow. This would bring the total number of insurers in the market to a record of 11.

The firm suggested that these shifting dynamics resulted in insurer participation rates “bouncing back” for schemes of all sizes, despite transaction numbers doubling in three years.

In addition to this, the shifting dynamics have resulted in full buy-in pricing being at its best level in years outside of a crisis period, creating opportunities for schemes of all sizes and has improved member service levels as insurers develop member-focused aspects to better differentiate their propositions.

However, LCP warned that despite the attractive conditions for schemes seeking to transact, there are key challenges in the post-transaction phase as the number of schemes transitioning to buyout is set to double over the next few years.

The firm suggested that as these pressures become more pronounced, schemes need to plan even more carefully to avoid post-transaction “bottlenecks”.

Commenting on the results, LCP partner and report author, Charlie Finch, said: “Last year we saw a seismic shift in the market with demand for buy-ins and buyouts rocketing on the back of improved funding levels.

“Coming into 2024, we’ve seen dynamics stabilise and volumes reach ‘cruising altitude’.

“As schemes assess their strategic endgames and insurers ramp up their capacity, we see a healthy and buoyant market that serves the needs of schemes moving to insurance – both now and in the future.”

Adding to this, LCP partner and report author, Imogen Cothay, argued that the shift in the market dynamics is bringing opportunities for pension schemes.

“Insurer participation rates have bounced back as insurer capacity has expanded to support over £50bn of volumes at competitive pricing,” she said.

“This has led to the most competitive full scheme pricing in years and has given schemes the leverage to seek improved insurer commitments in key priority areas such as member service.”

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