The UK defined benefit pensions de-risking market is expected to reach £70 billion in transactions in 2025, comprising £50 billion in bulk annuity deals and £20bn in longevity swaps, according to WTW’s annual De-Risking Report. This follows nearly £60 billion in de-risking transactions completed in 2024.
The report attributes the projected growth to favourable funding positions and the entry of new insurers, which are expanding opportunities for pension schemes to transfer liabilities. While some well-funded schemes may choose to run on to access surplus funds, many are expected to adopt longevity swaps to manage risk during this process.
Shelly Beard (pictured above), managing director of WTW’s pension transactions team, said market conditions over 2024 and recent increases in gilt yields have supported improved scheme funding levels. She also highlighted increased activity among trustees and corporates in addressing illiquid assets, refining benefit specifications, and improving data quality.
According to Beard, these factors, combined with competitive insurer pricing, have prepared more schemes to approach the insurance market for full scheme buy-ins.
Beard also noted the continued demand for longevity swaps, driven in part by the proposed Mansion House Reforms. These reforms have prompted some pension schemes with strong sponsors to reassess their long-term objectives, with longevity swaps emerging as a key tool to mitigate unrewarded risk.
An increasing number of schemes that have completed full scheme buy-ins are now focusing on transitioning to full buyouts. This shift places additional pressure on insurers, trustees, and advisers to ensure efficient processes for converting buy-in policies to buyouts.
Smaller schemes with prepared data may benefit from opportunities to fast-track this transition.
Insurers are also continuing to develop solutions for smaller pension schemes, typically those with transactions under £100 million. Four insurers have introduced processes involving fixed templates for benefits and data, as well as pre-defined contracts, to streamline pricing and onboarding.
Additionally, new entrants to the market in 2024 and early 2025 are expected to focus on the smaller scheme segment, driving further innovation and increasing options for these schemes.
Alternative approaches, such as those offered by Clara Pensions, are also gaining traction. Clara Pensions has completed three transactions under its superfund model, with its latest deal – the Wates Group – demonstrating the model’s viability for schemes with ongoing sponsor covenants.
The expansion of Clara’s offerings could attract more schemes to consider the superfund approach as a way to secure liabilities.
The bulk annuity and longevity swap markets are expected to experience continued regulatory scrutiny in 2025. The Solvency UK measures, which came into full effect at the end of 2024, are anticipated to bring greater clarity on their impact on pricing and policyholder security.
The Prudential Regulation Authority (PRA) is expected to maintain its oversight of the bulk annuity market as it monitors the growing size and volume of transactions.
The report suggests that a combination of market innovation, regulatory changes, and new insurer participation will continue to shape the UK pensions de-risking market in the year ahead. With a projected £70 billion in transactions, the market is positioned for further expansion, offering schemes a variety of tools to manage liabilities and navigate evolving risk landscapes.
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