The UK’s Bulk Purchase Annuity (BPA) market is undergoing a transformation—one that not only secures the retirement futures of millions but also channels billions into the UK economy.
At its core, the BPA market enables defined benefit (DB) pension schemes to transfer their liabilities to insurers. This endgame strategy allows schemes to secure member benefits while removing long-term financial obligations from sponsoring employers. As the funding positions of DB schemes have improved—driven in part by rising interest rates—more schemes are now able to afford such transactions. Estimates from the Pensions Regular (TPR) suggest over half - 54% - of DB schemes are in surplus on a full buyout basis.
This shift has fuelled a surge in BPA activity. In 2024 alone, nearly 300 transactions were completed, with ABI data showing this covered over 340,000 individuals. The total value of buy-ins and buy-outs reached £47.8 billion, following a record £49.1 billion in 2023. Notably, smaller schemes—once underserved—now account for nearly 80% of all transactions by number, thanks to innovations like streamlined quotation processes and insurer propositions tailored to their needs.
A win for the UK economy
This growth is not just a win for pension scheme members. It also represents a significant boost to the UK economy. BPA providers invest the premiums they receive into long-term assets, including infrastructure, housing, and green energy projects. These investments align with the government’s “productive finance” agenda, which seeks to harness pension assets to support economic growth and resilience. Similarly for scheme sponsors, a BPA transaction can mean reduced ongoing costs and liabilities, and access to any surplus from the scheme to reinvest.
We recently commissioned Oxera to carry out independent analysis of this market’s evolution and the policy considerations that could shape its future. The Oxera report (published today) highlights that the BPA market is functioning well. It is competitive, dynamic, and increasingly inclusive for schemes. More insurers than ever are now active in the market, including four new entrants since 2023. Oxera finds that this expansion has increased choice for trustees and driven innovation in both pricing and service delivery. Some examples of “non-financial” innovation – i.e. not just a focus on the price of buyout – include insurers enhancing digital tools for scheme members and offering more flexible investment strategies, including approaches to illiquid assets and ESG integration.
Government policy in the last few years has focussed on accelerating scheme consolidation. This report highlights the BPA market’s role in that agenda, finding that the private sector is already adapting to meet the needs of smaller and less well-funded schemes. Indeed, we now regularly hear from our members that multiple insurers are quoting on schemes with less than £100m in assets, a significant change from even a few years ago. That is why it was welcome to see the government’s outcome of their DB options consultation paper, which identified innovation in the commercial market, and the likelihood that this would continue. The government noted that more time was needed to identify if there was “a role a small focused government consolidator could play, if created”.
The report from Oxera suggests there is unlikely to be. This is partly because the same challenges of onboarding would apply to whatever endgame a scheme seeks. We know that there are challenges with accurate data, and a poll by LCP recently found that 70% of schemes believed administrators’ capacity is the biggest bottleneck to buyout. The focus should therefore be on addressing any remaining frictions on scheme endgame planning—such as administrative capacity constraints throughout the endgame supply chain or the cost to insurers of quotations for small schemes. These could be addressed through targeted, market-based solutions. Such measures would preserve the competitive dynamics of the market while enhancing efficiency and accessibility.
Next steps
As the BPA market continues to grow, it will be important for policymakers to nurture its strengths, avoid unnecessary interventions, and ensure that regulatory frameworks support innovation and resilience.
That is because as well as providing security to DB scheme members, BPA providers are investing in exactly the types of UK projects government wants to see. Last month, the ABI’s Investment Delivery Forum published an important update on the industry’s 10 year £100bn pledge to invest in long-term investments that support economic growth and the net zero transition. This update found that in 2024, annuity providers invested £10.9 billion into UK productive assets. These investments were primarily directed into real estate (£3.8 billion), utilities (£2.7 billion), and transport (£1.0 billion), with additional funding spread across sectors such as manufacturing, construction, and healthcare. Notably, nearly two-thirds of the capital was allocated to private and unlisted assets, reflecting the sector’s commitment to backing infrastructure and social projects that require patient capital. This builds on data we collected from our annuity provider members on their 2023 assets, which found that 65% of their investment portfolios were in UK assets. These assets, including gilts, are so attractive to BPA providers because of the alignment with their long-duration liabilities.
In conclusion, the BPA market is a quiet powerhouse — efficient, evolving, and essential. It deserves recognition not only for its role in securing retirement incomes but also for its contribution to the UK’s investment landscape. With thoughtful stewardship and continued collaboration between industry and government, it can remain a cornerstone of both pension security and national prosperity.