Market turmoil causes Bulk Annuity Pricing to fall

Harry Harper, Head of Risk Transfer at XPS Pensions Group said: “Market volatility is rapidly altering the pricing of all assets and this includes the price of bulk annuities. For those schemes that are already holding gilts, bulk annuities are now significantly more affordable than they were and for those schemes holding equities, bulk annuities have become less affordable. A driving factor is the economic turmoil which has made the credit assets that insurers buy cheaper, and due to there being 8 insurers in the market there is considerable downward pressure on bulk annuity pricing.  There has already been evidence of price cuts.”

“Although it is still early days we are anticipating at least a slight drop in volume for 2020 relative to the £44bn of bulk annuities purchased in 2019, as there are simply not enough large schemes out in the bulk annuity market at the moment to enable a re-run of 2020.  This small drop could become more significant if schemes with growth based asset strategies now find they need to postpone their end game.”