Ensure pension risk transfer decisions drive your scheme forward

Setting your scheme's long-term strategy is complex and the array of potential solutions bewildering. Mercer understands you only want the best outcome for your scheme's stakeholders. We will help you weigh up the options, manage the risks and make the right decisions to help you achieve your goals.
Speak to a Mercer specialist

Pension risk transfer - the new normal

Every year billions of UK pounds of defined benefit liabilities are transferred to insurers in the form of buy ins and buyouts or hedged using longevity swaps. Pension risk transfer occurs as a reflection of high demand among maturing DB schemes to transfer pension risk. Overall there has been an upward trend in annual deal volumes, which is expected to continue. New and innovative solutions which suit individual scheme needs, is the new normal of pension risk transfer.

In addition, more DB schemes than ever before are looking at providing their member benefits with greater flexibility through member option exercises. With expert guidance, trustees and sponsors can take advantage of the plethora of solutions. They can seize the opportunities that will accelerate their journey to their endgame.

We can help you move forward.

How we have helped our clients

The Mercer Risk Transfer team advised the trustees of the Thales UK Pension Scheme on the £2.7bn insurance transaction with Rothsay Life.

The transaction covers the retirement income liabilities of around 10,500 pensioners and almost 6,000 deferred members. It required a number of interesting features to be worked through, including:

• A single premium transaction provides residual risk cover from the point of buy-in. This cover was secured after an intensive due diligence exercise.

• A variety of innovative solutions for transferring the illiquid assets which the Scheme held.

• Innovation in the approach to defined benefits and data validation to ensure all objectives were met.

• Ensuring member experience is maintained following the buy-in.

“It has been a privilege for the Mercer team to support the Trustees through this transaction. In a very busy insurer market the effort put in by all parties over recent weeks to make this transaction happen has been phenomenal. This demonstrates again that large, complex transactions can complete successfully with clear objectives for all parties to work towards.”

Ben Stone, Risk Transfer Partner at Mercer

Mercer and Cardano Risk Transfer teams have advised on...

Over 100

deals as lead/major adviser 2022 - 2024

5 of the 9

annuity deals above £2,000m, including leading the £4.8bn for Boots

3 of the 4

UK longevity swaps for signification non-pensioner populations

Investment considerations for risk transfer transactions

Investments are critical to the success of any bulk annuity transaction. Understanding what insurance companies want and positioning your investments accordingly can help reduce risk and optimise outcomes.
Find out more

Mercer Risk Transfer's streamlined approach for schemes below £100m

In recognition of this market development Mercer have refined our streamlined approach to completing buy-ins and buy-outs for schemes below £100m.

There are now more pension schemes requesting buy-in and buy-out quotes than ever before with some insurers now completing a transaction every week. This increase in demand has impacted smaller schemes in their ability to obtain competitive quotations from busy insurers.

Our pension risk transfer team can help trustees and sponsors of defined benefit schemes identify the most effective way to manage, reduce or remove risk.
Andrew Ward

Leader Risk Transfer and DB Journey Planning

What are your pension risk transfer options?

There is no ‘one size fits all’ approach to transferring pension risk.  Each DB scheme has its own set of circumstances and strategic objectives.

Our first step will be to work with you and all relevant stakeholders to understand your DB scheme's strategic objectives. We will then work in partnership to identify the pension risk transfer solutions that are right for you and your members.

There are several solutions available for schemes in the process of assessing their DB pension risk transfer options. Mercer believes that all defined benefit (DB) pension schemes should consider which activities fit align with their long-term strategy. THey should also evaluate how and when to deploy these activities.

A pension buy in involves the trustees purchasing a bulk annuity policy to cover some or all of their scheme's DB liabilities. Total market volumes of bulk annuity pension risk transfer transactions have seen a step change in recent years to around £30 billion per annum. A wide range of factors mean that many schemes are closer than they think to affording a buy in. These factors include:

  • maturing schemes;
  •  sponsor contributions;
  • and financial market movements.

Mercer has a strong track record for completing deals for its clients and advised on around a quarter of all transactions in the bulk annuity market over 2020 and 2021.

Smaller pension schemes can struggle to get quotations in a busy bulk annuity marketplace. Our streamlined process can help. It has helped Mercer advise on 24 sub-£100 million deals and lead in 2024.

A pension buyout involves converting a buy in policy to a series of individual policies between the bulk annuity insurer and individual members. This allows pension trustees to discharge DB scheme liabilities and ensure that guaranteed benefits are provided to retirees.

Mercer has taken hundreds of pension schemes through this process. We have strong project management capabilities to support trustees and sponsors through pension buyout and wind-up.

There are a range of longevity hedging solutions that have been developed for pension schemes. Mercer is the only adviser with experience of implementing each of these, including deals of over £1 billion and deferred-heavy deals. Our expertise includes developing a unique small scheme offering.

Mercer has been involved with driving several hundred member options projects across a team of actuaries and communications specialists. They have deployed behavioural science techniques to improve member engagement.

Mercer has also developed a unique artificial intelligence (AI) tool,. This tool utilises the information from the thousands of member choices made in member options projects each year. It determines the likelihood of each member accepting an offer in relation to their pension benefits.

Clara-Pensions is the only commercial consolidator which has completed the Pension Regulator’s assessment process. In a challenging economic environment, we would expect that more distressed employers may find this an attractive option. Yet, commercial consolidators, and indeed buy in and buy out providers, are just one end of the spectrum of consolidation options.

Mercer has a team of consolidation experts covering pension risk transfer, covenant, DB master trust, and investments. They will help you work out what the right solution is for your pension scheme.

There are a growing number of other options available to those looking to transfer risk from their DB pension scheme. This includes solutions for former employee beneficiaries.

Our team

60

dedicated consultants

20

strong team of analysts

440

combined years of specific risk transfer experience

Related solutions
Related insights
Related podcasts
Related events
Related case studies

Talk to us

Get in touch to discuss which pension risk transfer options might help achieve your scheme's strategic objectives.