Legal & General insures $1.3 billion in pension liabilities

Legal & General Group U.K. Pension and Assurance Fund, London, completed a £925 million ($1.3 billion) assured payment policy with its sponsoring firm, Legal & General Assurance Society Ltd.

It's Legal & General's third assured payment policy transaction and the largest one to date, with volumes now exceeding £1.5 billion, the firm said in a news release Tuesday.

It is also the second such transaction with a Legal & General pension fund, following one for £400 million in December 2020 with the Legal & General Group U.K. Senior Pension Scheme. The latest transaction supports benefit payments for 2,000 retirees and 2,800 other participants.

Legal & General started the APP program in December 2019 with a £1.1 billion transaction with the AIB Group U.K. Pension Scheme, London. In May 2021, £61 million in AIB Group liabilities was converted to a buy-in.

In exchange for an upfront premium, pension funds are guaranteed cash flows that are fixed or linked to inflation and do not vary with longevity or other demographic experience. The financial firm said the assured payment policy approach gives pension funds an efficient way to match liability cash flow and selectively insure against investment-related risks such as changes in asset yields, interest rates and inflation. It also provides greater certainty on the timing and cost of a future buy-in or buyout, it said.

Chris Martin of Independent Trustee Services Ltd., who chairs the Legal & General pension fund involved in the latest transaction, in the release called it "a very significant event in the fund's lifetime as we move closer to securing our members' benefits. This is a unique product that removes a large proportion of the investment risk from the fund."

The Legal & General Group U.K. Pension and Assurance Fund has a little more than £1 billion in assets.