The transaction follows an initial buy-in covering £3.4bn of liabilities in May 2019 — PIC’s largest to date.
Three quarters of the liabilities insured in BAT’s deal with PIC today (29 July) relate to non-pensioners.
The trustees of the BAT fund – which has total liabilities of £4.1bn and over 10,000 members - were advised by Lane Clark & Peacock (LCP), who acted as lead transaction adviser. Linklater provided legal advice, while Hymans Robertson acted as scheme actuary. Mercer and Travers Smith acted as advisers to BAT, and PIC was advised by Herbert Smith Freehills.
BAT UK Pension Fund chair Graeme Munro said: “We are pleased to have secured this second insurance agreement with PIC, which guarantees the pension payments for many more of our members. Increasing the security of members’ benefits and reducing risk are top of the trustee’s agenda and this latest transaction is another step towards achieving our aims.
“We have been impressed with PIC’s commitment to excellent customer service 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.”
PIC head of business development Mitul Magudia said the transaction underlined “the excellent relationship formed between the BAT fund and PIC”.
He added: “This relationship has been fostered over the last two years, with the aid of LCP, since our initial £3.4bn transaction. We expect to see more schemes in the market complete repeat transactions when pricing objectives have been met.”
LCP partner Yadu Dashora said: “The BAT fund exemplifies the trend amongst pension schemes of establishing a strong foundation through an initial transaction that can be scaled up when attractive to secure further benefits, providing valuable optionality for the scheme without obligation.
“In this case, the fund planned ahead and pre-agreed terms for this transaction alongside the first buy-in, which allowed it to secure attractive pricing for some of its remaining long-dated non-pensioner liabilities.”
Linklaters global head of pensions Claire Petheram said the firm had seen growing interest from clients around future-proofing insurance terms.
“This shows the very real advantages of doing just that,” she continued. “By ensuring that the initial transaction anticipated this second transaction, the trustee addressed, up front, potential issues associated with the alignment of key terms and timescales and this foresight meant documents could be “fast tracked”, with the second transaction being concluded within the preferred commercial timeframe.”
Credit: Source link
