The Trustee of the Plumbing & Mechanical Services (UK) Industry Pension Scheme (the Scheme) has entered into a £560m buy-in with Legal & General covering pensioner members of the Scheme. The transaction was completed in June 2017 and represents just over 10% of the £5.1bn of bulk annuity business written in the first half of 2017.
The buy-in with L&G achieves a significant reduction in the level of risk in the Scheme’s investment strategy and will reduce ongoing volatility in the Scheme’s funding level. The total assets of the Scheme are just under £2bn.
Alan Pickering, Chairman of the Trustee said “The challenges facing our Plumbing Industry Pension Scheme have been well chronicled. We are working with the DWP, TPR and other stakeholders to find solutions that play fair by all concerned. We have not, however, been resting on our laurels and waiting for things to happen. The buy-in is the result of clear decisions taken by the trustees, hard work by our executive team and an adviser line-up second to none in the team working stakes. As a result, we can announce a good news pension story – a rarity these days. Employers and members alike will benefit from the increased security which this policy brings. Let’s hope we can deliver even more good news later this year as we continue to confront the challenges facing our Scheme.”
LCP was appointed by the Trustee as an independent specialist buy-in adviser earlier in the year. Clive Wellsteed, Head of LCP’s de-risking practice and lead adviser to the Trustee commented that “There was enormous insurer interest in this transaction from a buy-in market that is currently firing on all cylinders. We are pleased to have helped the Trustee manage the competitive dynamics and achieve such a good end result for the Scheme.”
The transaction included an innovative price lock mechanism that allowed the Trustee to lock the buy-in price to the value of the Scheme’s pooled corporate bonds and then transfer the ownership of these pooled funds to L&G.
Matt Wilmington, Director of Strategic transactions at L&G said “Our relationship with the Scheme began years ago in our asset management division, LGIM, and this buy-in demonstrates how Legal & General works with pension schemes at all stages of their journeys. Working with our colleagues in LGIM and with the Trustee’s adviser, LCP, we were able to transition assets efficiently and generate both cost and time savings for the Scheme.”