ICI Pension Fund, London, completed four buy-in transactions covering £1.8 billion ($2.8 billion) in pension liabilities, following two deals completed in March 2014.
The pension fund has now completed six separate buy-in transactions with Legal & General and Prudential between March 2014 and June this year. All deals cover a total of £5.4 billion of liabilities for the £10 billion pension fund, more than 50% of the fund's total liabilities, said a news release by Lane Clark & Peacock, which advised the trustee of the ICI Pension Funds on the deals.
The four latest transactions were completed using what LCP termed “umbrella” contracts, which the consultant said meant they were completed quickly and efficiently.
Including the deals with L&G and Prudential in March 2014, which covered £3.6 billion of retiree liabilities, the pension fund has now insured more than three times the amount of longevity risk through buy-ins than any other U.K. pension fund, the news release said.
“The key advantage of the 'umbrella and schedule' approach is that the trustee can move quickly to insure additional tranches of liabilities when competitive pricing becomes available, as the execution process is limited to documentation of the key 'tranche-specific' parameters,” said Clive Wellsteed, head of LCP's pension derisking practice and lead adviser to the trustee of the ICI Pension Fund, in the release.
“We are delighted to have completed these further transactions as part of our ongoing strategy to manage risk within the fund and which build on the significant transactions we implemented in March 2014,” said Heath Mottram, CEO of the ICI Pension Fund, in the same release. “I have no doubt that the governance and execution structure has delivered extra value through improving pricing and added security for members.”
Allen & Overy provided legal advice to the trustee.
Executives at LCP were not available to comment by press time. Spokesmen for parent company AkzoNobel Group could not be reached for comment by press time.