Key Takeaways
- • Mercer has launched the Mercer Pension Risk Exchange, an online marketplace that gives UK defined benefit (DB) plan sponsors continuous visibility into bulk annuity pricing and contract terms, according to Consultancy.uk.
- • The Exchange sources pricing and terms directly from insurers on a monthly basis, based on each scheme's actual benefit structure and individual member data, and widens the pool of insurers that could act as buyout counterparties.
- • Mercer says it has led 175 bulk annuity transactions with aggregate premiums above £16 billion and was involved in seven of the UK's ten largest buyouts, including all four transactions above £1 billion.
- • Legal & General's Phill Beach describes the platform as a potential tool for helping clients identify the point at which transacting offers best value, with timing cited as a key factor.
- • The platform was launched in the US in June 2015, with a Canadian launch planned in the coming months.
Summary
Mercer has launched the Mercer Pension Risk Exchange, an online marketplace designed to improve information for UK sponsoring employers and trustees pursuing a buy-in or buyout to de-risk defined benefit pension schemes. Mercer describes the platform as the first of its kind in the UK. It allows plan sponsors to monitor pricing and contract terms available in the group annuity market on an ongoing basis, and gives them exposure to a wider range of insurers that could serve as transactional counterparties for a buyout. Pricing and terms are sourced directly from insurers monthly and are tailored to a scheme's actual benefit structure and individual member data.
The launch comes against a difficult backdrop for UK DB schemes, which have been squeezed by low bond yields and interest rates that have eroded expected long-term returns. According to the article, private sector DB schemes held a combined deficit of around £250 billion in 2000. Companies have since injected roughly £500 billion into pensions, yet the deficit has trebled, and now stands at about £900 billion. Total DB liabilities exceed £2 trillion, well above the UK's GDP of £1.8 trillion.
Mercer states it has been one of the most active participants in the UK bulk annuity market, leading 175 transactions with aggregate premiums of more than £16 billion. The firm was involved in seven of the ten largest UK buyouts, including all four transactions above £1 billion.
Alan Baker, Partner and Head of Mercer's UK DB Risk team, said many companies want to transfer pension risk off their balance sheets but face barriers, including unclear information on the true cost of a buy-in or buyout, limited transparency, and fluctuating market rates and scheme economics. Phill Beach, Director of UK Pension Risk Transfer for Core Business at Legal & General, said the platform could help clients understand market pricing and the point at which transacting works best for a scheme, adding that timing is often the most important factor in realising best value. Costas Yiasoumi, Director of Defined Benefit Solutions at Partnership and a former Mercer consultant, said the Exchange brings a marketplace approach to bulk annuity sales and purchases for the first time, matching scheme demand with insurer capacity.
Mercer launched the platform in the US in June 2015 and plans to launch the service in Canada in the coming months.
The launch comes against a difficult backdrop for UK DB schemes, which have been squeezed by low bond yields and interest rates that have eroded expected long-term returns. According to the article, private sector DB schemes held a combined deficit of around £250 billion in 2000. Companies have since injected roughly £500 billion into pensions, yet the deficit has trebled, and now stands at about £900 billion. Total DB liabilities exceed £2 trillion, well above the UK's GDP of £1.8 trillion.
Mercer states it has been one of the most active participants in the UK bulk annuity market, leading 175 transactions with aggregate premiums of more than £16 billion. The firm was involved in seven of the ten largest UK buyouts, including all four transactions above £1 billion.
Alan Baker, Partner and Head of Mercer's UK DB Risk team, said many companies want to transfer pension risk off their balance sheets but face barriers, including unclear information on the true cost of a buy-in or buyout, limited transparency, and fluctuating market rates and scheme economics. Phill Beach, Director of UK Pension Risk Transfer for Core Business at Legal & General, said the platform could help clients understand market pricing and the point at which transacting works best for a scheme, adding that timing is often the most important factor in realising best value. Costas Yiasoumi, Director of Defined Benefit Solutions at Partnership and a former Mercer consultant, said the Exchange brings a marketplace approach to bulk annuity sales and purchases for the first time, matching scheme demand with insurer capacity.
Mercer launched the platform in the US in June 2015 and plans to launch the service in Canada in the coming months.
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