Private Credit Targets £1tn UK Pension Pool via Insurer Deals

The new pipeline for private credit

For years, private credit managers have grown by raising money from pension funds. They now have a second way into British retirement savings: buying, partnering with or supplying the insurers that take over corporate defined-benefit (DB) schemes. Reporting from August says private credit managers increasingly view Britain's DB sector, which holds more than £1tn, as a source of capital. Insurers that absorb these schemes are putting a growing share of their portfolios into private assets.4 The original Wall Street Journal framing put the figure at "$1tn". Trade coverage of the same report gives more than £1tn ($1.35tn) of liabilities not yet transferred to insurers, citing Stephen Purves of consultancy XPS.114 Whichever currency is used, the conclusion is the same. This is one of the largest pools of long-dated money in Europe still in play, and the largest alternative asset managers are organising themselves to capture it.

The most recent deal came from Standard Life. It set up a partnership with CVC Capital Partners, Goldman Sachs and PGIM under which investors will commit $2bn to private-market assets, to support its business of taking over DB schemes from corporate sponsors.4 Accounts of this deal differ in the details. One outlet called it a £2bn deal with a group led by US-based Prudential Financial and CVC.10 A law-firm analysis described the venture as Standard Life's UK Pension Risk Transfer Partnership with CVC, Prudential Financial, Goldman Sachs and MS&AD. It said the partnership gives the insurer access to direct lending, asset-backed lending and structured credit.1 PGIM is Prudential Financial's investment arm, so these versions largely fit together. The dollar-versus-sterling difference is unresolved, but every version describes the same model: private-markets firms putting in capital so that an insurer can buy more pension liabilities.

How a pension buyout became a private equity deal

In this market, a "buyout" does not mean a leveraged takeover of a company. It means a pension risk transfer, in which a company pays an insurer to take on its pension scheme and pay retirees from then on.10 Higher interest rates have reduced the present value of pension liabilities and pushed many schemes into surplus. That makes these deals affordable for trustees who could not have considered them a decade ago.4 Once a scheme moves over, the insurer manages its assets for decades. That long horizon suits private loans, infrastructure and real estate.4

Private capital firms have also been carrying out more conventional deals: buying the insurers themselves. Apollo-backed Athora completed its purchase of Pension Insurance Corporation in March 2026 and said it would move its group headquarters to the UK.1 The deal was reported at £5.7bn.10 The combined business manages about £118bn for roughly 3.1 million savers and retirees.4 Brookfield bought Just Group for £2.4bn in 2025 and merged in its existing UK insurance platform, Blumont.1 Blackstone did not buy an insurer. Instead it agreed a private credit partnership with Legal & General worth up to $20bn.1 One estimate holds that more than half of the most active insurers in the UK bulk annuity market now either have a partnership with, or are partly owned by, large overseas private investors. Rothesay, for example, is co-owned by MassMutual and Singapore's GIC.10

For the private equity investors behind these firms, the attraction is the fees on a steady, long-term flow of assets. Apollo reported an extra $65bn of fee-paying assets under management in the second quarter, partly because of the Pension Insurance Corporation acquisition.4 Athora expects Apollo-originated private credit to feed PIC's portfolio, with much of it in sterling to match UK liabilities.4 That is the core of the strategy. The insurer brings in the liabilities, and the affiliated manager creates the loans that back them.

The scale of private credit demand

Forecasts of how much will flow vary, but all of them are large. L&G expects about £500bn of UK deal volume over the next decade.10 A Macfarlanes analysis puts the figure at £600bn and says about £150bn has moved in the past three years.1 Standard Life's chief investment officer, Michael Eakins, gave the highest estimate. He expects about £700bn of the roughly £1tn in legacy DB schemes to move to insurers within seven to ten years, with half of that, £350bn, going into private credit.8 Eakins said UK insurers currently hold about £100bn of private credit. On his figures, they would need to originate 3.5 times today's total.8

The annual figures point the same way. LCP forecast 2026 buy-in volumes of £40bn to £55bn. The top of that range would beat the 2023 record of £49.1bn.7 Willis Towers Watson expects total risk transferred to insurers and reinsurers to reach £70bn in 2026, up 15% on 2025.9 Hymans Robertson counted 370 transactions last year, a record, compared with about 300 in 2024.10

The main reason insurers favour private credit is yield. Eakins said Standard Life's private credit portfolio has an average rating of A- and was originated about 70 basis points wider than comparable public credit in 2024.8 Regulation also matters. Under Solvency UK, insurers can apply a "matching adjustment" that lowers the value of their liabilities when the backing assets closely match them. A larger matching adjustment lets an insurer quote a lower price to take on a scheme.1 The regime has also removed the "sub-investment-grade cliff", which used to cut an insurer's matching-adjustment benefit sharply when an asset was downgraded below BBB.1 In practice, firms that can originate private credit suited to the matching adjustment can underprice competitors that cannot, and that pressure pushes more insurers toward partnerships.

Where the coverage diverges: risk and transparency

Coverage of the risks is sharply split. S&P Global estimates that about 40% of the assets backing UK insurers' retirement books are in private markets or other assets that rarely trade on exchanges. Roughly a third of that is private credit, mostly loans to mid-sized companies.4 S&P also found that Level 3 assets, which have no observable market prices, make up more than 10% of the portfolios at Legal & General, Standard Life and Just Group.5 S&P said this measure understates total exposure. It noted that PIC probably holds much of its private credit in the Level 2 category instead.5 Insurers do not have to disclose where borrowers are based, which sectors they lend to, or whether loans are held directly or through structured products.6

The reassuring evidence is real but limited. S&P stress-tested a hypothetical UK life insurer with about 12% of its portfolio in private credit and assigned the loans investment-grade ratings. It found the insurer kept enough capital to survive a shock similar to 2008.5 Critics argue that this result depends on its assumptions. Pensions commentator Henry Tapper argues that "gold-plated" insurance buyouts are not risk-free, and that exposure could grow beyond the levels stress tests currently cover.16

Regulators are closer to the skeptics. The Bank of England has warned that competition for pension business and pressure on margins could lead insurers to take more investment risk without being paid enough for it. It has also said insurers hold too little capital against some offshore arrangements and plans to raise those requirements.4 The Prudential Regulation Authority has specifically warned about offshore structures that could weaken loss-absorbing capital rules.10 Blackstone, for example, gets indirect exposure to UK pensions by supplying private credit assets to a Bermudian reinsurer.4

The exit question

Exit is the main issue here, on both sides. For corporate sponsors, a buyout is an exit: they hand the scheme to an insurer and no longer carry a volatile liability on their balance sheet. For the investors holding the loans, a way out is much less certain. Coverage of S&P's work pointed to the difficulty insurers would face if they had to sell large amounts of private assets in a downturn.5 Local government schemes, which are a separate pool still investing in private credit directly, show what that could look like. A Reuters review found that council schemes managing about £400bn hold more than £32bn of private and multi-asset credit, and almost half have 10% or more of their assets in non-bank lending funds.13 Oxford's Ludovic Phalippou warned that stress among borrowers could make it harder for schemes to exit. Hymans Robertson said it saw no immediate cashflow concerns.13 Gloucestershire's fund said it would borrow rather than be forced to sell if private assets caused liquidity problems.13

The 2022 crisis in liability-driven investment strategies is a recent example of how this can go wrong. Pension strategies seen as conservative needed emergency cash when gilt yields jumped, and the Bank of England had to step in.18 Commentators at the time warned that private credit was the least understood part of pension portfolios.12

Our reading

Our assessment is that the move of British DB money into private credit through insurers is structural, not cyclical, and it will continue. Regulatory incentives, schemes in surplus and fee-hungry managers are all pushing in the same direction. The pensions minister, Torsten Bell, is promoting DB "superfunds" partly to keep more of this capital invested in Britain.10 But L&G's own executives say they need the freedom to invest globally to offer the best pricing.10 The open question is whether disclosure and capital rules can keep up with the volumes. Eakins's own figures require insurers to originate more than three times today's private credit stock within a decade.8 Origination at that pace, in a market where disclosure is optional, is the kind of situation the Bank of England is right to watch.