The Fund had suitable governance in place to allow a buy-in transaction to be considered immediately after the EU referendum vote on 23 June. The transaction was signed eight working days after the vote – a record time for a buy-in transaction of this scale – allowing the Fund to benefit from market movements that had a favourable impact on pricing.
“The impact of the Brexit vote reduced the cost of the transaction by an estimated £10m, bringing it within the Fund’s target metrics.” said Clive Wellsteed, partner at LCP. “We needed to move quickly in case this opportunity closed, which was made possible by having innovative umbrella contracts in place with Legal & General specifically designed to facilitate the Fund to take advantage of sudden movements in the markets whilst maintaining the strong contractual terms and robust collateral structures already in place.”
In June this year the Fund completed a £630m buy-in with Scottish Widows and added Scottish Widows to its insurer panel alongside Legal & General and Prudential. Umbrella contracts are in place with all three insurers.
In March 2014 the Fund insured £3.6 billion of pensioner liabilities through simultaneous buy-ins with Legal & General and Prudential. The £3bn transaction with Legal & General remains the largest buy-in or buy-out policy ever executed in the UK. At over £7bn, the Fund has insured over twice the amount of liabilities as any other UK pension scheme.
Heath Mottram, CEO of the ICI Pension Fund, said: “The Fund’s strong governance and ability to move quickly was invaluable in taking advantage of this opportunity to further de-risk the Fund. This was our ninth transaction since March 2014 and LCP's commitment, energy and enthusiasm for delivering an exceptional service to the Trustee is as strong now as it was the day they were appointed.”
Cheryl Agius, Head of Strategic Pension Risk Transfer, Legal & General Retirement said: “The strength and depth of our relationship with ICI Pension Fund enabled us move fast when the market opportunity presented itself. The result is a further step forward in the de-risking programme which we are helping the ICI Pension Fund Trustees to deliver for their scheme members."
Lane Clark & Peacock LLP (LCP) acted as lead advisor on all nine transactions. Allen & Overy LLP provided legal advice to the Trustee.