Risk Transfer for Pension Schemes

Michael Anderson and James Mullins

The market for longevity risk transfer from defined-benefit pension schemes has shown considerable growth over time. The degree of innovation in products offered has also increased markedly, along with the number of market participants. Globally, the UK has seen the most activity up to the time of writing, along with the lion’s share of market innovation. This chapter therefore focuses mainly on the UK, given that it represents a well-developed, well-functioning market with many examples to draw on. However, we believe that all the themes we cover are also relevant to other countries. Material levels of pension risk transfer have also been observed in other parts of the world (particularly the US and Canada) as set out in Chapter 3, and these markets are likely to continue to develop over time.

This is against a backdrop of declining provision of defined-benefit pension plans, as the increasing costs and the risks to which they expose sponsoring companies make them less attractive. This has led to a greater number of such schemes closing to new members and ceasing further accrual of benefits. Ceasing accrual changes the emphasis in running these schemes from providing an

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