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1 August 2019

LCP lead adviser
on £3.4bn British American Tobacco UK Pension Fund buy-in

LCP acted as lead transaction adviser on the purchase of a buy-in policy by the Trustee of the British American Tobacco UK Pension Fund with Pension Insurance Corporation totaling £3.4 billion of liabilities.

The transaction is the third largest in the UK to date and is the largest ever transaction including both pensioner and deferred members, securing the benefits of 10,600 members (8,300 pensioners and 2,300 non- pensioners) whilst providing long-term certainty and security. The Fund has total liabilities of £4 billion, including a residual section open to ongoing accrual.

LCP advised the Trustee on strategic journey planning, transaction structuring and negotiated and executed the transaction. Linklaters provided legal advice to the Trustee and PIC was advised by Herbert Smith Freehills.

Michelle Wright, Head of Trustee Consulting at LCP and adviser to the Trustee said:

“This landmark transaction is an important milestone for the market. The BAT Fund exemplifies the growing trend of large schemes accelerating their de-risking plans due to attractive pricing and improved affordability. The Fund is the fifth scheme with a FTSE100 sponsor to complete a transaction this year. The competitive pricing negotiated with PIC allowed the Fund to maximize the amount insured. Having now insured three quarters of its liabilities, the Fund has successfully achieved another important step in reducing risk and increasing the security of members’ benefits.”

Brian Barrow, Chairman of the British American Tobacco UK Pension Fund, said:

“This transaction is very good news for our members, insuring the vast majority of benefits within the Fund. It achieves a significant step towards the Trustee’s objective of reducing risk and increasing the security of members’ benefits. We are delighted that we have been able to complete a transaction of this scale successfully, despite the recent market volatility. PIC has been flexible and innovative throughout and I want to thank them and our advisers for helping us achieve our de-risking goals.”

Schemes with a FTSE100 sponsor to complete a deal so far this year include 3i, BAT, Marks & Spencer, Pearson and Rolls-Royce.