The TRW Pension Scheme, Solihull, England, agreed to a £2.5 billion ($3.9 billion) partial buyout with Legal & General Assurance Society, forming part of a yearlong risk transfer project, said David Ellis, U.K. head of bulk pensions insurance at Mercer, the lead adviser to the trustee.
The deal insures about 70% of liabilities in the fund, and covers 22,000 retirees, said Mr. Ellis. He said Mercer also acted as strategic corporate adviser on the wider derisking of the U.S. parent company's U.K., U.S. and Canadian pension arrangements.
"A year ago the U.S. parent company laid down a challenge to its advisers: (it wanted) to announce in (its 2014 accounts) that it had settled a large (part) of its U.K. pension obligations," said Mr. Ellis in a telephone interview. The U.K. risk transfer project included risk management exercises that ran concurrently, including a pension increase exchange, an enhanced transfer value exercise and winding up lump sums. "There was lots of activity over the year, culminating in this buyout," said Mr. Ellis.
In a separate telephone interview, Adrian Hartshorn, senior partner in Mercer's financial strategy group and strategic adviser to TRW, said the ETV exercise covered 9,000 participants who were former employees but had not yet retired. "All in all, this was a complex project, but the resulting cost-effective reduction in the scheme's liabilities has demonstrated the value of the work."
In a news release, Legal & General said the transaction was the largest buyout deal to date in the U.K.