Pensions to buy over 3 bln stg of bulk annuities in '09-research

* UK insured bulk annuities sales top 2.4 bln stg in '09 * Transactions since '07 with big pension plans hit 10 bln stg

By Sarah Hills

LONDON Oct 21 (Reuters) - Pension plans are likely to purchase more than 3 billion pounds of bulk annuities this year, eclipsing the historical trend of around 1 billion pounds a year, according to research from Mercer.

The global financial consultancy said the bulk annuity market has grown over the long term, despite the effects of the credit crisis on the ability of trustees and sponsoring employers to purchase bulk annuities.

Insurers' sales for the third quarter of 2009 exceeded 900 million pounds ($1.49 billion), and pension plans have purchased more than 2.4 billion pounds of bulk annuities during the first three quarters of 2009, said Mercer.

Despite the reduced funding levels and corporate cash constraints as a result of the credit crisis, sizable deals in the market have still occured; most notably the 100 million pound buyout of starters and alternator producer DENSO Manufacturing Midlands' pension funds to Pension Insurance Corporation in September 2009.

Also in September, the Merchant Navy Officers Pension Fund completed a 500 million pound buy-in with insurer Lucida, covering the pension liabilities of 22,000 retired members.

David Ellis, a Principal at Mercer, said despite the increases in the bulk annuity market, purchases were still significantly less than in 2008 when sales were around 8 billion pounds -- but remained optimistic of continued growth.

"Taken against 2008, 2009 has been flat in terms of activity and down in terms of deals completed but trustees and employers are right to have been cautious given global events.

"However, this is a lumpy business - for example, 25 per cent of the value of deals in 2008 came from only two transactions. In 2009, clients are continuing to transact with insurers and there are good deals to be had."

With pension funds and life insurers under pressure to increase their capital solvency to fund the pension market, investments with the insurance markets are becoming more popular as a way to back legacy pension commitments. Mercer said it expects these markets to grow strongly in the future.

Mercer research shows that more than 10 billion pounds worth of large bulk annuity deals have now been completed since the start of 2007. Overall bulk annuity sales since the start of 2007 total more than 13 billion pounds. (Editing by Andy Bruce)