Pension plan annuity purchase update – Q4 2021

Market activity

Group annuity risk transfer sales ($ millions)

Source: LIMRA Secure Retirement Institute

Following an exceptionally strong third quarter, pension buyout sales totaled $12.4B in Q4 2021, bringing the annual total to $34.2B, which represents the highest annual single premium buyout sales total since 2012 and a 37% increase over 2020 sales. However, Q4 2021 sales were 10% lower than Q4 2020. 172 buyout contracts were sold in the quarter, bringing the annual total to 420 contracts, which is 3% lower than the 2020 contract total.

What we’re seeing

Following a very strong 2021, pension buyout activity remains busy to start 2022, especially compared to last year, with plan sponsors seemingly planning ahead to avoid the typical rush at the end the calendar year. This provides optimism that 2022 will be another very strong year in the PRT market. Annuity pricing remains very competitive which will also increase plan sponsor interest. For retiree only cases, pricing continues to average 97% of the economic liability, while plan termination cases which include in-pay and deferred annuities average approximately 100%.

What we’re hearing

Insurer appetite for buyouts remains extremely strong, with many of the insurers looking to slowly move up market and increase sales goals from 2021. We expect pricing to remain competitive and wouldn’t be surprised if a new entrant or two looks to join the ever expanding PRT market later this year.

¹ Measured using FTSE curve and best estimate of underlying mortality.
² Based on plan demographics and the mix of deferred and in-pay annuities.


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