A set of transactions expected to close before Christmas mean the U.K. bulk annuity market is on track to hit £10 billion ($15.2 billion) in 2015, said Aon Hewitt.
Last year remains the largest for bulk annuity deals, with £13 billion of written business.
Although the three months ended March 31 saw only £803 million of bulk annuity deals, the following quarter recorded £3.6 billion of transactions.
The second quarter was dominated by large deals, with seven transactions involving at least £300 million in assets. The largest this year was the £2.4 billion Civil Aviation Authority Pension Scheme, London, entering into a £1.6 billion pension buy-in with Rothesay Life, announced July 21.
In an update on the bulk annuity market, the consultant also highlighted the onset of Solvency II regulations for insurance companies, which begin Jan. 1. These rules could hit bulk annuity pricing, but Aon Hewitt said in its update that most insurers do not yet know the extent to which the rules “represents a cliff-edge in pricing.”
Individual insurers have suggested an increase in pricing for deferred members of between 0% and 8%. “We suspect that the top of this range will not represent the price transacted in 2016 auction processes, as rises of 5% or more may simply make an insurer uncompetitive for deferred members,” said the update.
For retirees, however, prices are not expected to rise, and in some cases could help pricing, said Aon Hewitt.