Smaller defined benefit (DB) pension schemes considering a bulk purchase annuity (BPA) deal have more opportunities and flexibility than ever, and should therefore carefully assess broking approaches, Hymans Robertson has argued.
The consultancy noted that greater innovation from established insurers and an increase in the number of providers in the market had “rapidly changed” the traditional broking dynamic.
This has resulted in smaller schemes being able to attract greater interest from insurers, and have increased leverage to negotiate better pricing and commercial terms, Hymans Robertson said.
It therefore called on smaller DB schemes to recognise and embrace this change and approach the transaction with an updated commercial mindset or risk leaving money on the table.
“We’ve seen more change in the small scheme end of the market in the past few years than in the decade before it,” commented Hymans Robertson head of core transactions and risk transfer specialist, Iain Church.
“Where many trustees once faced limited insurer appetite, today they can access broader choice, improved pricing and more flexibility to tailor transaction structures to meet their specific needs.
“Innovation from established providers, combined with the arrival of new market entrants, has reshaped what’s possible. The effect is clear: more competition, more engagement and better outcomes for smaller schemes.”
This growth meant that schemes previously considered too small to get quotes from multiple insurers had more choice than ever before, and Church urged smaller schemes to embrace this evolved dynamic by approaching the BPA process with a commercial mindset to achieve the best results for the scheme and members.
“By carefully considering their broking strategy, trustees can make the most of expanding insurer appetite, greater innovation and strong pricing conditions,” he continued.
“Defaulting to a standardised process without carefully considering the market dynamics, and what insurer opportunities are out there, risks leaking value and could result in a poorer member experience.”
Alongside the increased competition for smaller schemes, Hymans Robertson was also seeing developments in post-buy-in capabilities, with insurer investment in post-transaction processes meaning some schemes can progress from buy-in to buyout in under a year if data issues are resolved early.
“Others are introducing post-buy-in services that include data cleansing or GMP equalisation, reducing the administrative burden on trustees and providing certainty on buyout timescales,” Church added.
“With supply increasing and demand rising, smaller schemes that don’t fully consider the opportunities available in the market risk being caught in growing backlogs for buyout and higher scheme costs.
“Considering this early, using the right tools and getting specialist advice gives smaller schemes the best chance of securing strong outcomes for members and sponsors alike.”
