Rising rates to boost UK company pensions insurance

Rothesay and rivals such as Legal & General and Pension Insurance Corporation insure company defined benefit, or final salary pension schemes through so-called bulk annuities

Rising interest rates in Britain will make it easier for company pension schemes to afford the cost of insurance, leading to growth in the pensions insurance market, the new chief executive of insurer Rothesay said on Thursday.

Rothesay and rivals such as Legal & General and Pension Insurance Corporation insure company defined benefit, or final salary pension schemes through so-called bulk annuities.

There are around 2 trillion pounds in assets in the pension schemes.

The bulk annuity market has been growing in recent years as companies are keen to offload the schemes - many of which are in deficit - from their balance sheets.

They typically need to inject more capital into the schemes before an insurer will take them on.

However, higher interest rates are improving the schemes' funding positions, Tom Pearce told Reuters.

The number of schemes that are very solvent now is extraordinary, he said. We'll see ground-breaking individual transactions and unprecedented annual volumes as well.

Rothesay completed a 640 million pound bulk annuity for a pension scheme sponsored by Smiths Group earlier this year.

Consultants Hymans Robertson expects bulk annuity deals in 2023 to exceed the record 44 billion pounds seen in 2019.

Rothesay announced the appointment of Pearce as CEO on Thursday. Pearce was formerly managing director of Rothesay and is taking over from Addy Loudiadis, who the firm said was retiring after 15 years as CEO.

Pension Insurance Corporation on Thursday reported a sharp rise in first-half pre-tax profit to 923 million pounds from 10 million a year ago, which it said was driven by rising interest rates.