How is the ‘jumbo’ level of pension buyouts affecting how insurers invest?
PwC expects 2026 to be a “jumbo” year for pension buyouts in the UK asset owner space, with more than £50bn of transaction volumes forecast. But how is that changing the way insurers, on the other side of the transaction, invest? (Kira Hofmann/dpa via AP)
Good morning. One of the long-running trends in the UK asset owner space in recent years has been the pace of pension scheme buyouts. This obviously affects both pensions and insurers - the two asset owners who are part of this trend.
According to PwC, 2026 is looking to be a “jumbo” year for buyouts with more than £50bn of transaction volumes forecast.
Matthew Cooper, PwC’s head of pension risk transfer, told AOX the increase in recent years has been driven by the number of sub-£100mn schemes securing bulk purchase annuities, which he said had “really ramped up”.
He said: “Back in 2021 there were under 100 buy-in transactions for schemes of this size, but this increased to nearly 250 in 2024. There's increased competition.”
Last year saw a record number of transactions by number, though in cash terms things were slightly weaker due to fewer “jumbo” schemes coming to market.
One of the factors that may have contributed to this was the pension schemes bill, which is working its way through the British parliament.
Cooper said: “The bill looks at a run-on surplus access scheme. We don’t know what that framework looks like and it is interesting for large well funded schemes. So at the moment there is a delay in decision making.”
But this means insurers, who have not traditionally been the most exciting investors with most of their portfolios held in safety-first assets like government debt, have to back these liabilities.
So are they changing the way they invest?
Derek Steeden, PwC’s life insurance market director, said many insurers were now partnering with asset managers to get exposure to private credit.
He said: “Competition is hotting up, with new insurers quoting and existing insurers entering tie ups with asset managers because this volume is likely to continue for many years. A member of a pension scheme just retiring could live for another 30 years.
“Finding assets with sufficient term to back or match these payments is a challenge which is why you are seeing these tie ups.
“Insurers partnering with an asset manager who is an expert means the asset manager can tailor the debt it is creating with the borrowers so the debt matches the [regulator’s] expectations
“The ability to originate these assets which meet these strict matching requirements constrains the ability to move faster. That’s why you’re seeing the theme of insurers engaging in partnership with private credit specialists.”
Steeden said more tie-ups of this nature were likely - particularly since it will enable more insurers to access the private credit market.
So how concerned should we all be about this given the quite negative vibes around private credit at the moment? See for reference the First Brands bankruptcy last year.
Nan Paramanathan, PwC’s life insurance market leader, said not very.
She said: “Insurers have been investing heavily outside the pure government debt portfolio for a number of years.
“Insurers have been working to get the right frameworks in place. Robust risk management has been in place for some time
“This is quite an actively watched and managed process. The regulator is very clear in its supervisory role. It is not the wild wild west.
“These insurers nearly always buy to hold. Private credit goes through so much governance given the regulatory guidelines.”
