Value of bulk annuity deals to decline in 2015

The total value of deals involving transferring the risk of company-defined pension schemes to insurers is likely to decrease this year, a consultancy group said on Monday.

According to Aon Hewitt, the value of so-called “bulk annuity” deals is expected to fall from last year’s record of £13bn to £10bn in 2015, with £3.6bn in bulk annuity deals completed in the second quarter, compared with £800m in the previous three months.

"With insurers busy on a substantial number of transactions which could conclude before Christmas, £10bn is not an unrealistic expectation for year," Aon Hewitt said in the report.

The deals provide a source of income for UK life insurers, as the government pensions reforms introduced in April has slashed the sale of individual annuities by approximately 50%, according to official data.

However, with European Solvency II capital rules set to be implemented in January next year, insurers are expected to be forced to set aside more money to cover the costs involved in bulk annuity deals.

Aon Hewitt indicated that some details of the new regulations “have remained obstinately grey".