The UK pension risk transfer (PRT) market completed £12bn worth of buy-ins and buyouts over the first half of 2022, up from £7.8bn in H1 2021, analysis from LCP has revealed.

The research, based on insurers' latest financial reports, suggested that the UK PRT market has started the year "strongly", with H1 2022 marking the third largest first half ever for the market.

The make-up of the market remained very similar to 2021, according to LCP, with mid-sized buy-ins and buyouts, between £100m and £1bn, making up 30 per cent of transactions, while sub-£100m deals made up 67 per cent of H1 2022 transactions.

There was also a number of larger transactions over the period, including £1.0bn full buy-in by WH Smith with Standard Life, alongside five other transactions over £500m, including the TI Group scheme and the Whitbread scheme.

The largest transaction in the period was the £2.3bn follow-on pensioner buy-in agreed by the British Steel Pension Scheme with L&G, followed by a £1.1bn full buy-in by the EDS 1994 pension scheme with PIC.

LCP said that competition remains "fierce", with the five insurers who led 2021, Aviva, Legal and General (L&G), Pension Insurance Corporation (PIC), Rothesay and Standard Life, all writing over £1bn of buy-ins and buyouts in H1 2022.

According to the analysis, L&G wrote the highest buy-in and buyout volumes of £3.7bn, representing a 31 per cent market share, followed by PIC's £2.4bn, representing a 20 per cent market share.

LCP partner, Charlie Finch, commented: “Buy-in and buyout activity has continued strongly into 2022 with volumes increasing by over 50% in the first half of the year compared to 2021. Activity has been ramping up over the second half and we expect to increase further in 2023.

“The activity has been driven by surging pension scheme funding positions on the back of the biggest rise in long-term interest rates this century (20-year gilt yields have more than trebled to 3.7 per cent pa since the start of the year).

“We expect this to turbo-charge demand from pension schemes looking to de-risk next year. The challenge is that insurers simply do not have the resources to quote on all of the opportunities that could come to market.

“The schemes that win will be those who have invested in preparation across cleaning data, drawing up detailed benefit specifications, getting their investments transaction ready and putting in place suitable governance arrangements with the sponsor. Such preparation will pay dividends over the coming years.”

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