Industry experts have hit back at concerns over the bulk annuity market's ability to keep up with record demand seen this year, telling the Work and Pensions Committee (WPC) that "there are no capacity issues in the buyout market".

Speaking to the WPC as part of the ongoing defined benefit (DB) pension inquiry, Pensions Insurance Corporation CEO, Tracy Blackwell, said that despite industry concerns, she was not aware of any pension schemes being unable to get a bulk annuity quote.

"There are no capacity issues in the buyout market," she stated. "There may be a lot of people around talking about it for different reasons, but there are no capacity issues nor do we expect there to be.

"Our employee base has doubled over the past year, we have no shortage of staff to deal with it, and we are not aware of any pension scheme that has not been able to get a quote for a bulk annuity in recent past.

"There is a completely orderly transition going on from DB pensions into buyout and we don’t foresee any difficulties at all."

Association of British Insurers (ABI) director of policy, long-term savings and protection, Yvonne Bruan, suggested that this position is also reflective of the broader insurance industry, not just PIC.

"There are eight insurers who are active in this market, while a ninth one has announced they will enter the market this year," she pointed out.

"The largest deal this year was for £6.5bn, the smallest for £600,000, so schemes of all sizes can transact. Wwe don't think there is a capacity issue."

And whilst Braun noted that a transaction could face capacity issues from the adviser side, with a lot of work involved around data cleansing etc, "that’s the case in any form of endgame".

There was also confidence that, were any capacity issues to arise, these could be dealt with, as Insight Investment head of client solutions group, Serkan Bektas, suggested that there is a "strong rationale" for insurers to invest in their resources, infrastructure and address capacity issues.

Despite the confidence in terms of capacity, Abrdn senior solutions director, Brian Denyer, admitted that there is anecdotal evidence of a supply demand imbalance in the buyout market, which is being more keenly felt by smaller schemes

"Whilst those smaller schemes (up to £100m) may receive a quote, generally speaking they will have to go on an exclusive basis with one provider, and then they will need to decide if that’s good value, whether that's good value because they can afford it or because it is competitive."

However, Denyer said that there could be options to address this, arguing that consolidation solutions, where smaller schemes are brought together before buyout, could help.

Adding to this, Blackwell pointed out that there are already a number of organisations, including PIC, working on solutions to streamline the process for small schemes, and alleviate the time and cost burden of this process.

"I would let the private sector work out solutions before jumping to something like a public sector consolidator, because it is happening and so far it has been working," she stated.

Blackwell also dismissed concerns over whether smaller schemes working with an insurer on an exclusive basis could prevent competition, explaining that where an appropriate deal can't be reached, the scheme is free to go to the rest of the market.

Blackwell and Braun also both disagreed with broader concerns around competition in the insurer market, after WPC member, Steve McCabe, suggested that "eight or nine companies does sound like quite a stranglehold on an emerging market".

"The government also wants scale and consolidation," explained Braun.

In addition to this, Blackwell emphasised the regulatory protections in place in this space, stating that the Prudential Regulatory Authority (PRA) is a "very robust regulator".

She stated: "[PRA] wants to make sure insurers have the right capital, but also the right people and resources, and we and our competitors we have taken the best part of a decade to build up our teams and resources to be able to invest in productive assets, and you need scale and time to be able to do that.

"We have also spent a lot of time and resources to be able to do that, so we have robust risk management systems and robust risk management processes to make sure it's not a free-for-all."

Braun agreed that this is a "very heavily regulated sector" when asked about recent warnings for insurers to exercise moderation, stating that the industry will take very careful note of what the PRA has to say.

"It is worth saying that other variations of endgame would be far less regulated, so I am not worried for this part of the market," she stated.

However, Bektas argued that pension scheme trustees should also be giving broader endgame options consideration, stating: "Pension schemes should pursue buyout if their circumstances warrant that, but they should explicitly consider the implications, cost implications, member benefit implications, corporate sponsor benefits that can arise.

"Surpluses can be deployed in a multitude of ways, that can be to pay a buyout premium, but that surplus can be used differently toward broader aims as well, and we think that is the real opportunity."

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