Private credit managers are increasingly looking to Britain’s £1tn-plus defined-benefit pension market as a source of capital, as insurers allocate a growing share of their portfolios to private assets, according to Private Equity Wire.
$2bn partnership example
A new partnership involving Standard Life, CVC Capital Partners, Goldman Sachs and PGIM commits $2bn to private-market assets. Standard Life stated the arrangement supports its business assuming defined-benefit pension schemes from corporate sponsors. The deal illustrates investment firms seeking exposure to the UK pension risk-transfer market, creating a channel for private credit to reach long-term retirement assets.
Scale of remaining liabilities
UK defined-benefit pension schemes still hold more than £1tn ($1.35tn) of liabilities that have not transferred to insurers. Many schemes closed to new members years ago but retain substantial asset pools. Higher interest rates reduced the value of pension liabilities and moved many schemes into surplus, enabling trustees to pursue bulk annuity transactions. Insurers then manage the pension assets and retirement payments.
Insurer asset allocations
The long-term liabilities make private-market investments attractive to insurers for matching against private loans, infrastructure and real estate. Apollo, Brookfield and Blackstone have expanded involvement in the UK pension risk-transfer market through insurer ownership stakes or by supplying private-market assets. S&P Global estimates that roughly 40% of assets supporting UK insurers’ retirement businesses sit in private markets and non-traded assets, with around one-third of that allocation in private credit including loans to mid-sized companies, according to Private Equity Wire.
Regulatory scrutiny and firm moves
The Bank of England has warned that competition for pension business and margin pressure could prompt insurers to assume additional investment risk without adequate compensation. Offshore structures remain an area of concern, with the Bank planning higher capital requirements for some arrangements.
Blackstone supplies private-credit investments to Legal & General for its retirement portfolio, including financing for a grocery distribution centre in North Carolina, and provides assets via a Bermudian reinsurer. Brookfield acquired life insurer Just Group and plans to support its portfolio with infrastructure, energy and real estate investments. Apollo holds a minority interest in Athora; Athora acquired Pension Insurance Corporation, creating a combined business with around £118bn in assets serving approximately 3.1 million savers and retirees. Apollo reported an additional $65bn of fee-paying assets under management in the second quarter, driven in part by Athora’s acquisition of Pension Insurance Corporation, according to Private Equity Wire.
