Ofcom continues pension de-risking journey with Legal & General, completing a fifth buy-in transaction with the insurer.
15 October 2014
Legal & General has recently completed a buy-in arrangement with the Ofcom (Former ITC) Staff Pension Plan covering £50 million of the Plan’s liabilities. The buy-in covers around 350 Plan members of which about 30 are current pensioners. This transaction, which was signed in July 2014, follows four previous buy-ins entered into by pension plans sponsored by Ofcom, all with Legal & General. In total, the five transactions, which took place over the course of the past six years, cover £250 million of pensioner and deferred member liabilities.
Alastair Smith, Ofcom’s Finance Director said: “Ofcom proactively manages its pension liabilities and we approached the Trustees earlier this year to propose further de-risking. This latest buy-in has enabled Ofcom to insure all of its pension liabilities in the Ofcom (Former ITC) Plan. This is a very significant step and benefits both the Plan members and Ofcom itself. The Plan members benefit from having their benefits secured in full through Legal & General bulk annuities – on top of the security that continues to be provided by the Plan and Ofcom as sponsoring employer – and Ofcom is no longer exposed to the uncertainty of asset returns, interest, inflation and longevity risk.”
Rodney Jagelman of Law Debenture, independent Chair of the Trustee Board said: “We are pleased to have been able to complete another buy-in with Legal & General on attractive terms. The buy-in has enabled the Trustees to take a further considerable step on our journey towards fully de-risking all of the Ofcom pension liabilities and so improve the security for all members.”
Ian Aley, senior consultant at Towers Watson, Ofcom’s advisers, said: “We are pleased to have assisted Ofcom in achieving this significant milestone in their overall pensions de-risking strategy. The earlier agreements with Legal & General meant that Ofcom was able to move quickly once we had helped it identify a good time to secure the remainder of the Plan’s benefits. It will be quite common for schemes to enter into multiple transactions en route to securing all of the scheme’s liabilities, and Ofcom’s experience provides a good template for this approach.”
Julian Hobday, Head of Business Development, Core Business, Bulk Annuities and Longevity Insurance for
Legal & General’s Retirement business said: "We are delighted to have been chosen again by the Trustees of the Plan to secure further liabilities and extend our valued relationship with Ofcom. Yet again, we have been able to demonstrate
Legal & General’s ability to provide an effective de-risking solution and to conclude contract negotiations in a timely way.”
Legal advice was provided to the Trustees by Mayer Brown and to Ofcom by Freshfields Bruckhaus Deringer. LCP provided actuarial advice to the Trustees.
Notes to editors
Background on Ofcom
Ofcom sponsors two pension plans, the Ofcom (Former ITC) Staff Pension Plan and the Ofcom Defined Benefit Pension Plan. Of the five buy-in transactions referred to in this press release, one relates to the Ofcom Defined Benefit Pension Plan and four relate to the Ofcom (Former ITC) Staff Pension Plan.
Background on the Ofcom (Former ITC) Staff Pension Plan
The Plan has two sections – the Ofcom section and the S4C section. This buy-in arrangement relates to the Ofcom section and results in all of the liabilities in the Ofcom section being insured with Legal & General. The S4C section of the Ofcom (Former ITC) Plan is not covered by this or the earlier de-risking transactions.
Background on Towers Watson
Towers Watson (NYSE, NASDAQ: TW) is a leading global professional services company that helps organisations improve performance through effective people, risk and financial management. With more than 14,000 associates around the world, we offer consulting, technology and solutions in the areas of benefits, talent management, rewards, and risk and capital management.
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 nearly 30years and was voted Risk Reduction Provider of the Year at the 2014 and 2013 UK Pensions Awards and Risk Management Provider of the Year at the Pensions Age Awards 2014.
Legal & General provides annuities to over 750,000 current pensioners and over 170,000 deferred pensioners and also completed a number of landmark transactions. These include the recent £3.0 billion bulk annuity arrangement with the ICI Pension Fund, the largest bulk annuity policy arranged by a pension scheme in the UK to date, and the £3.2 billion longevity insurance transaction with the BAE Systems 2000 Pension Plan.
Legal & General offers a range of de-risking solutions, which includes buy-out, 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. The excellent services we are able to provide also include payroll, administration and communications services.
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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