Legal & General Group has a long-standing relationship with Evonik Industries AG (“Evonik”), having provided investment management services through Legal & General Investment Management (LGIM) across the company’s UK and US pension schemes.
In the UK, both the Trustee and the company worked in partnership with Legal & General on a sole insurer basis to complete the buy-in transaction by the end of 2020, within just three months of initial discussions. The Trustee, following strategic advice from LCP, merged its four UK pension schemes to facilitate the transaction. Effective collaboration among all parties, combined with a solutions-driven approach, allowed the Trustee to achieve its aims, locking the premium to the value of the schemes’ assets held with LGIM during the contractual negotiation and transferring these assets directly in respect of the premium.
This transaction allows Evonik to continue its global pensions de-risking journey, having agreed a $93 million lift-out of the US plan in September 2020 with Legal & General Retirement America (LGRA), covering over 1,700 retirees.
Both transactions demonstrate the continued appetite for Pension Risk Transfer (PRT) in the UK and US and mark Legal & General’s second global Pension Risk Transfer (PRT) transaction.
LCP acted as lead transaction advisor, providing specialist de-risking advice to the Trustee, with Hogan Lovells International LLP providing legal advice. Clifford Chance provided legal advice to Legal & General. Other advisers include Aon acting as Scheme Actuary and investment adviser to the Trustee, as well as Willis Towers Watson and Eversheds Sutherland providing actuarial and legal advice to Evonik, respectively.
John Towner, Head of New Business, Legal & General Retirement Institutional: “This transaction demonstrates how we are uniquely placed to work across both the UK and US to offer global market-leading PRT services and help multinational companies secure their pension obligations across countries. Following the success of our transaction in the US, we are pleased to have been trusted to work on a sole insurer basis with Evonik and the UK Trustee to secure its members’ pension benefits in the UK. We continue to see high demand for PRT transactions across both markets and look forward to helping more global businesses on their de-risking journeys.”
Stefan Hentschel, Global Head of Pensions, Evonik: “The Company is pleased with the US and UK transactions which provide certainty for the members’ pensions with a strong provider and reduce the financial risk to the sponsor. We were able to leverage the relationship and work effectively with Legal & General to complete both transactions and de-risk the schemes in 2020.”
Colin Marsh, UK Chair of Trustee, Punter Southall Governance Services: “I am pleased that through this transaction we have achieved the Trustee’s long-term goal of ensuring the benefits promised to its members are fully secured. By working closely with the sponsor and our skilled advisers, the Trustee was able to move quickly to secure a positive outcome for our members.”
Charlotte Quarmby, Partner, LCP: “We are delighted to have been able to help the Trustee successfully reach this milestone on their de-risking journey. In our role as specialist de-risking adviser we were appointed to design an optimal strategy for insuring the four schemes. We identified that a full buy-in could be achieved by all four schemes if they were taken to market together and by working with Legal & General we helped the Trustee to move quickly to lock into an attractive transaction.”
1 A ‘lift-out’ is an insurance solution offered in the US, where a subset of plan participants are lifted out and transferred to an insurance company
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