Legal & General wins the largest UK bulk annuity arrangement to date of Â£3bn for ICI Pension Fund.
26 March 2014
Legal & General has today 26 March 2014 announced that it has secured a buy-in arrangement with the ICI Pension Fund, (“the 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.
Notes to editors
Background on ICI Pension Fund
Available at www.icipensionfund.org.uk
Background on Legal & General
Legal & General is one of the UK's leading financial services companies and one of the UK's top 50 companies in the FTSE 100 Index. Legal & General has been an active participant in the insurance solution pension de-risking market for over 25 years and was awarded Risk Management Provider of the year at the 2014 Pensions Age Awards and Risk Reduction Provider of the year at the 2013 UK Pensions Awards.
Legal & General Retirement provides income to 770,000 pensioners (2012: 705,000). In total we insure one million customers, including deferred pensioners who rely on us for their future pension arrangements and the pensioners whose financial security we support by protecting their pension schemes against longevity risk.
This is the fourth insurance arrangement provided by Legal & General covering of over £1bn of pension scheme liabilities, previous transactions being the buy-in with Turner & Newall Pension Scheme in (£1.1bn 2011), the longevity transactions with the Pilkington Superannuation Scheme (£1bn 2012) and BAE Systems 2000 Pension Plan (£3.2bn 2013).
Legal & General offers a range of de-risking solutions, which includes buyout, buy-in, longevity insurance and liability-driven investment (LDI), to pension schemes of all sizes. Legal & General is also able to tailor a combination of LDI and longevity insurance to provide “DIY buy-in” solutions. Legal & General has expertise in investment management, all aspects of defined benefit provision as well as an in-depth understanding of mortality trends and longevity risk.
Background on LCP
LCP is a firm of financial, actuarial and business consultants, specialising in the areas of pensions, investment, insurance and business analytics. LCP has led the way in helping pension schemes to de-risk using buy-ins and buy-outs, including major transactions for the pension schemes of GlaxoSmithKline (2010), General Motors (2012), Tate & Lyle (2012) and Phillips (2013).
LCP is part of the Alexander Forbes group of companies, which employs over 4,000 people internationally. For more information on Alexander Forbes and its insurance, risk and financial services, please visit the website at http://www.alexanderforbes.com/ For enquiries please contact Sarah Pryor, LCP on +44 (0) 207 432 3096.
The information contained in this release is intended solely for journalists and should not be used by consumers to make financial decisions.
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