The Pension and Assurance Scheme of the Land Securities Group of Companies has completed a £110m medically-underwritten buy-in with Just.
The deal sees the FTSE 100 company reduce risk its scheme by insuring three quarters of its pensioner liabilities with the specialist insurance firm.
The buy-in was completed over a two-week period in December at a time when buy-in pricing compared to low risk assets in the scheme’s portfolio, such as gilts, was attractive.
According to those working on the deal, this enabled the buy-in to be tailored to reflect the trustees’ inflation risk appetite – with built-in flexibility should this appetite change in the future.
By structuring the transaction in this way, the trustees were able to focus on transferring those risks that offered best value, it added.
A medical underwriting exercise will now take place which could potentially create improved terms to the trustees.
Medically-underwritten buy-ins take account of individual members’ health status. Having this extra information enables insurers to refine their pricing to be more competitive and gain a better understanding of the risk they are taking on.
Pension and Assurance Scheme of the Land Securities Group of Companies trustee chairman, Peter Frackiewicz, said the deal enabled the scheme to manage risk, protect itself against demographic risks, and provided a source of income that will help the trustees meet benefit payments while reducing the need to divest assets in order to do so.
Hymans Robertson was the lead adviser to the trustees and Sackers provided legal advice.
Frackiewicz added: “Hymans Robertson’s expert assistance and advice helped us complete our transaction smoothly and efficiently, securing excellent value for us by closing the deal within a very short timeframe. We are also grateful to Just, who worked closely with us and our advisers and showed flexibility to develop solutions to accommodate our requirements. This helped us conclude the transaction efficiently and smoothly.”
Hymans Robertson partner and head of risk transfer solutions, James Mullins, said buy-in pricing compared to other low risk assets such as gilts is currently at the most attractive level in several years.
He added: “We expect these favourable conditions to persist over 2017. We expect to see many more pension schemes transferring risk using buy-ins over the coming year.”
Just said the deal was one of the most significant it has completed since its merger with Partnership Assurance in April last year.
Just director of defined benefit solutions, Tim Coulson, said: “Working closely with their advisers, the trustees were able to move from a decision to go ahead to signing the contract in one of the shortest periods that we have seen. This is an excellent example of how those pension schemes that are well prepared can achieve excellent outcomes in the bulk annuity market.”
