The UK pension risk transfer (PRT) market is set for a "vibrant year" in 2025, according to LCP, as the number of transactions is expected to surpass 300 for the first time.

LCP said that 2025 is going to be another "bumper" year, suggesting that despite real choice between insurance and run-on, insurance is expected to remain the ultimate endgame for the majority of schemes, driving continued high demand for buy-ins.

As a result of this, it estimated that total buy-in volumes could reach £40-50bn for the third year running.

It also suggested that the numbers of smaller scheme transactions will continue to grow as insurers increase their dedicated capacity, which will propel 2025 transaction numbers to new heights.

However, LCP said that total 2025 buy-in volumes will be largely influenced by the individual decisions and strategies of large schemes, such as NatWest, which completed buy-ins totalling a reported £11bn last year.

Market growth is set to support this continued demand, as LCP suggested that there will be at least one new DB superfund confirming its planned market entry this year, and one new entrant insurer in 2025, taking the buy-in market to a record 11+ insurers.

This increased capacity, and increased competition as new entrants make their presence felt, is also expected to lead to continued favourable buy-in pricing in 2025, according to LCP.

However, LCP said that schemes are also likely to have an increased focus on non-pricing factors when selecting insurers, explaining that, with many schemes in surplus, non-price factors such as member service will become a much bigger focus.

In total, LCP predicted a 33 per cent increase in the number of schemes issuing individual member policies and winding up in 2025, estimating that over 150 schemes will issue individual policies and wind-up in 2025, up from around 110 in 2024.

But LCP acknowledged that this will be a challenge for the industry, given the "huge resource demands" this rapid growth is set to bring, stressing that continued investment and the right specialist support are "essential".

LCP principal, Ruth Ward, stated: “Given the insurers’ ability to source a wide range of assets across both UK and overseas markets and their appetite to innovate, we remain optimistic that pricing will continue to be favourable over 2025.

“Despite fears of a capacity crunch, the smaller end of the market is performing well and is seeing rapid growth thanks to a number of dedicated services established by insurers for smaller schemes.

"The record transaction activity is however putting an ever-growing strain on third-party pension administrators who are being asked to work through long lists of historic data issues to get schemes ready to buy-in and ultimately wind-up.

"We estimate the number of schemes set to wind-up this year will grow by over 33 per cent. Running a smooth and timely process to achieve this ultimate milestone is a key challenge for the pensions industry as the DB pensions universe slowly runs off.”

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