The ICI Pension Fund, London, completed a £750 million ($971 million) pension buy-in with Legal & General, benefiting from a favorable impact on pricing in the wake of the U.K. decision to exit the European Union.
The transaction was signed eight days after the EU Referendum vote on June 23. Market movements following the Brexit vote led to an estimated £10 million saving in the cost of the transaction, said Lane Clark & Peacock, the lead adviser on the deal.
“The trustee of the fund had put the governance in place to allow it to react quickly to market opportunities,” said Charlie Finch, partner at LCP, in an e-mail. “It was aware that the Brexit vote could potentially give rise to such an opportunity. The fund's target metrics would not have been met without the £10 million estimated saving that arose from market movements in the wake of the Brexit vote.”
The deal is the £10.8 billion pension fund's second-largest buy-in, bringing the value of total liabilities insured to £7 billion out of a total around £11 billion. LCP, which was the lead adviser on all nine transactions, added in a news release that this represented twice the amount of liabilities insured compared with any other U.K. pension fund.
The pension fund has umbrella contracts in place with L&G, which are designed to allow the fund to take advantage of sudden movements in the markets “whilst maintaining the strong contractual terms and robust collateral structures already in place,” said Clive Wellsteed, partner at LCP, in the release.
The fund completed a £630 million buy-in with Scottish Widows in June, adding the firm to its insurer panel alongside L&G and Prudential, all of which operate under umbrella contracts. The fund's £3 billion buy-in with Legal & General in March 2014 remains the largest executed in the U.K.
A spokeswoman for AkzoNobel, ICI's parent company, said the firm continues to look for ways of derisking liabilities.
Allen & Overy provided legal advice to the trustee.
Jack Lejk contributed to this story.