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Risk Management

Pearson Pension Plan agrees to buy-in with Aviva, Legal & General

The Pearson Pension Plan, London, insured £1.2 billion ($1.6 billion) in liabilities in two transactions with Aviva and Legal & General, a spokesman at the pension fund said.

The £3.5 billion pension fund conducted a buy-in for the first time using its strong funding position to purchase two insurance policies, covering approximately one-third of its total liabilities and two-thirds of retiree liabilities, the spokesman said.

"This puts the plan in an even stronger position and substantially reduces Pearson's future pension funding risk, at no further cost to the company," the spokesman added.

Lane Clark & Peacock was lead adviser to the trustee and legal advice was provided by Linklaters.

The buy-in policies provide a platform for further derisking through an umbrella structure that allows further transactions to follow quickly under the existing contracts.

"The key advantage of an umbrella contract, as used by the Pearson Pension Plan, is the ability to complete future buy-ins quickly if pricing is competitive, building on the strong relationships and contract terms already in place with the insurers," said Clive Wellsteed, partner at LCP and lead adviser to the trustee, commenting on the transactions in a news release.