PensionsFirst Capital offers comment on the bulk annuity market

Many believed that insurer Aviva’s decision early this year to withdraw from the pension £50m-plus bulk annuity market (which includes both buy-ins and buyouts), signalled the death knell for the market. However, contributing to a feature for Pensions Age magazine, PensionsFirst Capital CEO Hugo James disagrees, arguing that it innovation can overcome many of the barrier’s to the market’s success. He states that one of the reasons why the very large transactions aren’t happening is because from a shareholder value perspective, paying an insurer a premium to meet its 15% return on capital requirement is destroying shareholder value for sponsoring corporates that are achieving a lower return on their capital. For these corporates, it makes sense to put up their capital to capture the same return for their own shareholders.

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