£61m transaction agreed with the AIB Group UK Pension Scheme converts c.20% of the original APP transaction completed in December 2019
27 May 2021
Legal and General Assurance Society (“LGAS”) today announces that it has agreed a £61m transaction with the AIB Group UK Pension Scheme (the “Scheme”) to convert a tranche of its existing Assured Payment Policy (APP) into a buy-in policy. The transaction, which aims to further de-risk the pension scheme, did not require any additional funding from the Scheme’s sponsor, AIB Plc, as expected.
Covering both deferred members and new retirees, this transaction marks the first time an APP has been partially converted into a new buy-in policy.
The conversion builds upon the original £250m APP transaction with the AIB Group scheme in 2019. This also follows the recent £400m APP transaction with the Legal & General Group UK Senior Pension Scheme in 2020.
The original transaction, and announced conversion, helps the AIB Scheme on its journey to full risk removal within planned timeframes. The innovative APP solution facilitates this by locking down investment-related risks and reducing volatility between the assets and bulk annuity pricing of the cashflows covered by the APP. As the APP already covered investment risk for the covered cashflows, the additional premium payable by the Trustee for the conversion was only in respect of the additional risks, principally longevity, that are now being passed to Legal & General.
The Trustee was advised on the transaction by Mercer, with Sackers providing legal advice.
Frankie Borrell, Head of Client Solutions, Legal & General Retirement Institutional: "We are delighted to have taken this important step with the AIB Group UK Pension Scheme, a market first. By entering into an Assured Payment Policy in 2019, the trustees and their corporate sponsor secured a more certain path to the pension scheme’s target destination. This transaction represents a key milestone on that journey.
This first conversion also underscores how APPs can deliver meaningful benefit for many trustees and their scheme members in the months and years ahead."
Established in 1836, Legal & General is one of the UK's leading financial services groups and a major global investor, with over £1.2 trillion in total assets under management* of which 39% is international. We have a unique and highly synergistic business model, which continues to drive strong returns. Legal & General provides powerful asset origination and management capabilities directly to clients, which also underpin our leading retirement and protection solutions. We are a leading international player in Pension Risk Transfer, in UK and US life insurance, and in UK workplace pensions and retirement income. Our purpose is to improve the lives of our customers and create value for our shareholders. Through inclusive capitalism, we are investing in long-term assets, such as real estate and infrastructure, that can help build a better society for the future.
Legal & General Retirement Institutional (LGRI) works with trustees and sponsoring companies of defined benefit (DB) pension schemes of all sizes to settle their pension obligations and secure scheme members’ benefits, through a full range of buy-ins, buyouts and other de-risking solutions. Our Client Services’ 12-month rolling Net Promoter Score (NPS) is above 70, which is widely regarded as being at a “world class” level. Including the premium to be received in relation to this transaction, LGRI has annuity assets estimated at £63bn.