2 April 2019
LCP has advised the Trustees of the Dresdner Kleinwort Pension Plan (the “Plan”), on a pension insurance full buy-in insuring £1.2 billion of pension liabilities. The full buy-in is with Pension Insurance Corporation (“PIC”) and covers the whole Plan but is split across two transactions for the two sections in the Plan, a £900 million Final Salary Section and a £300 million Money Purchase Section.
LCP acted as lead adviser on the transaction and legal advice was provided by Linklaters.
The transaction allowed members in the Money Purchase Section with hybrid defined contribution (“DC”) and defined benefit (“DB”) benefits to choose to transfer their benefits to an alternative arrangement, or to convert them into pure DB benefits. The DB benefits were then insured under the terms of the full buy-in.
The Plan is part of Commerzbank AG following the acquisition of Dresdner Bank in December 2009. Commerzbank is a leading international commercial bank with locations in just under 50 countries. Commerzbank finances approximately 30% of Germany’s foreign trade and is a leader in financing corporate clients in Germany.
David Salter, partner in LCP’s de-risking practice and lead advisor, said: “We are pleased to have used our expertise to design a structure that provided members with flexibility and a high level of certainty over their options, whilst dovetailing with the insurance transaction to give the Trustees and Commerzbank cost certainty.”
Uzma Nazir, Head of Origination Structuring at PIC, said: “Given the unusual hybrid DC and DB benefit structure the Trustees required flexibility from us to ensure that both sections of the Plan were insured in line with their requirements. We are of course delighted to complete this, the biggest transaction of the year so far and one of the largest to date.
“Affordability of buy-ins and buy-outs has improved significantly in the past year and this is driving a record number of schemes and companies seeking to insure in full.”
LCP published their annual pensions de-risking report last week which predicts a pension buy-out boom due to increased affordability and attractive pricing. LCP predicted full transfers from FTSE 100 pension schemes to insurers could soar from a total of £5bn to £300bn over next 10 years.
Are we at the tipping point?
Pensions de-risking report
With the market at a tipping point, the key question is whether pension plan demand could outstrip the available insurance capacity for the first time in 2019.Download the 2019 report