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Aon says UK bulk annuity market remains set for a record year

LONDON (6 August 2018) – Aon, the leading global professional services firm providing a broad range of risk, retirement and health solutions, has said that the UK bulk annuity market is well on track for a record year.  Aon suggested last December that 2018 could be a record £30 billion year for the market - and this remains firmly on course, with £20 billion of business already transacted.

2018 has seen a number of large publicised deals, including those for Siemens at £1.3billion for a pensioner buy-in, and for PA Consulting, at £850 million, the largest buyout of the year so far, both of which Aon arranged with Pension Insurance Corporation (PIC).

John Baines, partner in Aon’s Risk Settlement team, said:
“We remain confident that the market is on track to hit our forecast. The first six months of 2018 was the busiest ever first half of the year in the bulk annuity market, and was also the most fruitful in terms of volume of business placed.

“The big question is, can it continue for the rest of the year? The signs are good – and we fully expect the surge of deals will continue, with the structure and size of deals breaking new barriers during 2018.”

Aon has continued to see attractive pricing on recently completed auctions and the favourable market conditions remain supportive of annuities offered at a yield materially in excess of gilt values. However, there is a possibility of prices increasing if the high demand is sustained through to the autumn.  

John Baines continued:
“This busy market has also attracted a new wave of pension schemes. The combination of improved insurance pricing and continued scheme funding gains is leading to overall improved solvency positions. We expect this trend to continue and the focus to sharpen on achieving full buy-out.

“One key concern remains around potential capacity constraints but, at present, access to capital and willing takers for longevity risk are not a problem. Even so, access to high yielding illiquid assets to drive competitive pricing and available as well as experienced resource on the pricing teams will remain key issues. In addition, the insurers are also working through the implications of the recent consultation issued by the Prudential Regulatory Authority in relation to equity release assets and the associated capital reserves. Adding all this together, we are seeing signs of the insurers becoming a little more wary about deciding to quote on a new auction and an increasing degree of selectiveness on more speculative or indicative quotations.

“In other words, we have a market where insurers can be relatively choosy – and, as we have always said, it will therefore be the well-prepared schemes that are likely to experience the best outcomes.”

Media Contact
For further information please contact:
Colin Mayes                                           Marina Sanchez
Aon                                                        CNC
01372 733689                                          07535 693214                  

Notes to Editors
About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

Aon announced in May 2018 it will retire the business unit brands of Aon Benfield and Aon Risk Solutions, which follows the retirement of the Aon Hewitt business unit brand in 2017. This move was designed to increase the rate of innovation across the firm and make it easier for colleagues to work together to bring the best of Aon to clients. Aon has five specific global solution lines: Commercial Risk Solutions, Reinsurance Solutions, Retirement Solutions, Health Solutions and Data & Analytic Services.

Follow Aon on Twitter: @AonRetirementUK
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