The British Airways-sponsored Airways Pensions Scheme (APS) and Legal and General have completed a £4.4 billion pensioner bulk annuity buy-in, covering around 60% of all pensioner liabilities.
Existing longevity reinsurance contracts of approximately £1.7 billion, entered into with Canada Life Reinsurance and PartnerRe, were incorporated into the buy-in arrangement.
The APS is a defined benefit (DB) occupational pension scheme, established in 1948 and closed to new members from 31 March 1984. As at 31 March 2018, it had assets of £7.6 billion and 24,196 members, of whom 1.4% were active, 3.6% deferred and 95% pensioners.
The transaction represented the largest pensioner buy-in completed in the UK market to date, according to Legal and General. The APS is now 90% hedged against all longevity risk.
Virginia Holmes, chair of the scheme trustee, said: “This transaction is the latest in a number of insured arrangements entered into by the Airways Pension Scheme. It demonstrates the vision and determination of the trustee to reduce risk and increase security for members.
“This is the culmination of much hard work undertaken over several months and we are pleased to be taking this significant step in the scheme’s de-risking journey.”
Laura Mason, chief executive officer of Legal and General Retirement Institutional, said: “We are very pleased to have been able to work with the British Airways pensions team and to have completed this ground-breaking transaction. It is a great example of how Legal and General is helping trustees secure their members’ benefits through our ability to manage complex circumstances and offer flexible solutions.”
PricewaterhouseCoopers (PWC) worked with the APS trustee as lead transaction advisers, with Allen and Overy, Eversheds Sutherland and Willis Towers Watson also advising throughout the process. Legal and General were advised by Clifford Chance.
Ben Stone, pensions director for PWC, said: “We are delighted to have worked with the trustee on this landmark project, from identifying and securing the buy-in opportunity through to project management of the transaction and conversion of existing longevity insurance.
“Completing a deal of this size in the busiest ever year for pension buy-ins shows that the market is working well. High demand from pension schemes puts pressure on insurer assets and manpower but those schemes with well-planned approaches to the market continue to access positive de-risking insurance opportunities.”