The UK pensions risk transfer market has so far shown remarkable resilience to the economic impact of the Covid-19 pandemic. Although market conditions may mean some schemes will be further away from being able to de-risk than they were before the pandemic, the market remains busy and others will still be in a position to proceed with planned risk transfer activity. We can also expect to see a greater volume of forced transfer activity reaching the market in the coming months and years as a result of sponsoring employer insolvency.

With some careful planning, and an eye on certain practical considerations, there is no reason why schemes in a position to proceed cannot achieve their risk transfer objectives despite the undoubted challenges posed by the pandemic.

A healthy deal pipeline Many pension schemes which had already substantially de-risked their investment strategy before Covid-19 hit have been able to continue to de-risk through bulk annuities and longevity insurance transactions. Professional services firm Aon has recently predicted that around £50 billion of risk will be transferred to the bulk annuity and longevity swap market by the end of this year, which would be a remarkable outcome given the disruption and uncertainty caused by the pandemic.

This portrait of a busy market is consistent with our own experience over the summer and early autumn. We advised a number of businesses executing successful risk transfer transactions, including trades which were put on hold in the spring due to the market volatility arising from Covid-19. Of course, the picture is not entirely rosy across the board. Some schemes have been more impacted than others by deteriorating market conditions, particularly those with greater exposure to equities and other growth assets. This has often coincided with significant uncertainty over the strength of the employer covenant supporting their scheme.

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