A new process to monitor prices and transact rapidly

13 May 2017

KEY QUESTIONS:

  • What is the price of a bulk annuity policy for my scheme?

How does the price compare to the technical provisions, to the company accounting reserve and to the assets?

  • Can I monitor the price over an extended period of time, so I know if the situation gets better?
  • If the price is right, can I transact quickly?

The four questions above are straightforward ones, but in the past getting an answer to the first two has been awkward and time consuming. In the case of the third, the response has often been “there are a limited number of updates that issuers will provide”, and to the last one, “not for a few months, by which point the price may have changed!”

New technology and new processes have now dramatically changed the landscape:

  • Off the back of the latest formal actuarial valuation, recent automation and standardisation of the data and benefit layout has now made it both quick and easy for the “first round of negotiation” bulk annuity price to be obtained from one or more bulk annuity insurers. To be clear, these can be actual insurer prices based on individual member data.
  • A monthly automated comparison of the price from several insurers can be made available to the trustees and sponsor online, with comparisons versus one or more of:
    • the technical provisions,
    • the company’s accounting reserve, and/or
    • the asset value.
    • The monitoring can be repeated automatically every month, so yes it is possible to know if and when the price improves.
    • Can I transact if the position becomes suitable? The answer is now, “yes, pretty quickly”. Provided an actual insurer price based on individual member data was obtained at the start of the monitoring process, a rapid transaction before conditions change will be possible.

BuyOut Market Watch May 2017 chart