Legal & General has announced that it has secured a buy-in arrangement with the ICI Pension Fund covering £3bn of the pensioner liability. The buy-in is the largest ever bulk annuity policy arranged by a pension scheme in the UK.
The liabilities covered by the policy are a subset of the Fund’s pensioner population and were selected to ensure the optimum balance between risk reduction and economic value for the Fund. Members will see no change to the way their pensions are paid, or the way in which the pension scheme is administered.
Implementation of the insurance arrangement is the culmination of a 6 month competitive tender process, at the end of which, Legal & General were selected for their covenant strength and ability to work with the Fund’s Trustee to ensure a smooth transition of the assets.
David Gee, Chairman of Trustees for the ICI Pension Fund, said; “I’m delighted that the Trustee has achieved such a significant step in its strategy to further reduce risk in the Fund. Members can be reassured that this will improve the security of their benefits by substantially reducing longevity risk for the Fund”
Heath Mottram, CEO of the ICI Pension Fund, said “Investment in these buy-in policies builds on the Fund’s strong de-risking foundations. The transactions are the result of significant work by the Trustee over the last six months including a thorough selection process and negotiation of competitive pricing and terms.”
Tom Ground, Head of Bulk Annuities and Longevity Insurance at Legal General comments; “We are extremely pleased to have implemented this landmark buy-in arrangement with the ICI Pension Fund, one of the larger pension funds in the UK. Legal & General have worked closely with the Trustee to develop a bespoke arrangement, which leverages both our 27 years' experience from being a market leader in the bulk annuity market with our ability to transition assets using our industry-leading investment management capability. This transaction further demonstrates Legal & General's ability to provide innovative bulk annuity solutions to large pension schemes.”
Clive Wellsteed, Partner at LCP and lead adviser to the Trustee said; “At £3bn, this landmark transaction is the largest of its kind to date, with the Fund using its scale to negotiate competitive terms, reduce risk and enhance member security. It demonstrates the appetite of mature final salary schemes to de-risk their pensioner liabilities and shows how transactions can be successfully structured at a scale not previously seen.”
This transaction follows the c£8bn of pension scheme liability insured by Legal & General in 2013 across buy-ins, buy outs, longevity insurance as well as, the acquisition of Lucida Ltd, a closed annuity buy out company with £1.4bn of annuity assets.
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