Demand for group annuities in the pension risk transfer market surged in 2024 and many of the conditions which contributed to the growth remain in place today, according to presenters at a recent webinar, hosted by Sun Life’s DB Solutions team.

The total pension risk transfer market surpassed $11-billion in transactions in 2024, a 40 per cent increase from last year’s total of $7.8-billion and an impressive new record,” says DB Solutions’ associate director, Mark Brenyo. “The market is now four times larger than back in 2015 and transaction volume has hit double digit billions for the first time, ever.” 

Very healthy solvency position 

He says demand in 2024 came as the result of a few things falling into place: Pension plans are in a very healthy solvency position and many are looking to lock in these strong funded positions through group annuities without the need to provide additional cash or top up contributions. (Brenyo, citing research from Mercer, pointed out that the median solvency ratio among plans followed by Mercer’s Pension Health Pulse was 116 per cent as of Dec. 31, 2023, rising to 125 per cent by the end of the following year.)

In addition to improving plan’s funded positions, market uncertainty contributed to group annuity demand – volatility that has persisted into 2025.

Market size 

As for market size, he breaks things down by transactions worth more and less than $400-million in size: Transactions worth less than $400-million, 130 deals or 96 per cent of all transactions, made up 51 per cent of the market while the remaining six deals over $400-million made up the remaining 49 per cent. “Early indications are fewer large and jumbo deals in the 2025 pipeline,” Brenyo says.

Repeat buyers, however, contributed more than 38 per cent to the market’s growth, on average, over the last four years. “Last year, 25 repeat buyers brought $4.5-billion in transactions,” he added.

As for Sun Life, that company reports transacting close to $6-billion worth of buy-in annuities – these annuity payments are made to the pension plan itself, while the plan continues its own administration and member services. “Of those annuity buy-ins, over 70 per cent have since converted to an annuity buy-out,” Brenyo says. “Plan sponsors are using buy-ins as a first step on their de-risking journey.” The company also transacted $2-billion in annuity buy-outs. Under a buy-out annuity transaction, the insurer also assumes responsibility for plan administration.