LONDON (Reuters) - British bulk annuity sales hit record levels in the first half of the year, pensions consultants said on Thursday, as companies look for ways to offload pension risk.
Bulk annuities, which involve the transfer to an insurer of company defined benefit, or final salary, pension schemes, have become more popular in Britain as many schemes are in deficit.
Britain has around 2 trillion pounds in private sector pension liabilities.
Deficit-ridden pension schemes can hinder or delay merger transactions, as in the case of Thyssenkrupp (DE:TKAG) and Tata Steel's (NS:TISC) two-year talks to merge their European steel businesses.
However, bulk annuities are expensive, explaining the relatively low take-up so far, industry specialists say.
Bulk annuity sales totalled 7.8 billion pounds in the first half, helped by more competitive pricing, consultant LCP said in a statement.
"I have little doubt that 2018 will set a new record of over 15 billion pounds," LCP partner Charlie Finch said.
Pension Insurance Corporation wrote the largest volume of bulk annuities, at 3.3 billion pounds, LCP added.
Consultant Hymans Robertson said five major players wrote 7.1 billion pounds in bulk annuity business, more than double volumes seen in the first half of 2017.
Insurer Legal & General (L:LGEN) agreed deals to cover 1.1 billion pounds of bulk annuity risk in the first half and is bidding for 20 billion pounds of business in the second half, it said earlier on Thursday.
