LCP were lead advisers on the third pension buy-in between Pension Insurance Corporation (PIC) and the trustee of the British American Tobacco UK Pension Fund (the ‘Fund’), insuring approximately £250 million of liabilities. PIC has now insured all £4.1 billion of the Fund’s liabilities, covering the pensions of all 10,000 members. 

The Trustee was advised on its strategic journey by LCP, who also acted as lead adviser for all transactions. 

The Fund and PIC formed a strategic partnership at the outset to provide a strong foundation and terms for future transactions. This gave the Fund a high level of certainty on pricing and process, and the terms of the buy-ins allowed the Fund to manage its illiquid assets without loss of value.  

The first buy-in covering £3.4 billion of liabilities was completed in May 2019, with a second £400 million buy-in in July 2021 and the third and final £250 million buy-in in October 2022. The latest buy-in means the Fund is the largest pension scheme in the UK to have insured all its liabilities through a series of buy-ins phased over time.  

Yadu Dashora, Partner at LCP and lead adviser to the Trustee on their de-risking strategy and all three transactions said: “Successfully completing a phased buy-in journey from start to finish requires careful planning and execution.  For many schemes like the Fund, this will require bespoke solutions for illiquid asset holdings. The Fund is a leading example of how to navigate this well, pioneering a range of solutions that will serve other schemes well over the next few years as they seek to follow in the Fund’s footsteps and reach full insurance.” 

Graeme Munro, Chairman of the British American Tobacco UK Pension Fund, said: “After many years of de-risking the Fund we are pleased to have reached a major milestone of having all our liabilities insured with PIC. This is another step towards the Trustee’s objective of increasing the security of members’ benefits and reducing risk. We have been consistently impressed with PIC’s commitment to excellent customer service ever since the first transaction and this was an important factor in our decision to transact with them again. I would like to thank PIC and our advisers for their collaborative and flexible approach in getting the transaction done in volatile market conditions.” 

Mitul Magudia, Head of Business Development at PIC, said: “It has been a pleasure working with the Trustee and its advisers on securing this final buy-in. This transaction underlines the excellent relationship formed between the Fund, its advisers, and PIC. This relationship has been fostered over the last three years, since our initial £3.4 billion transaction in May 2019. These three transactions have moved the market forward in respect of what is possible in the risk transfer market and have systematically addressed each challenge faced. We expect the approach taken here to form a blueprint for the large numbers of schemes currently preparing to move to insurance.”