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Legal & General closes £1.1bn pension de-risking deal with AIB Group

13th February 2020 - Author: Matt Sheehan

Legal & General has announced the completion of a pension de-risking transaction with Allied Irish Banks plc, consisting of an £850 million buy-in and a £250 million Assured Payment Policy (APP).

Legal_&_GeneralCovering 1,300 pension scheme members, the deal makes use of a new solution developed by Legal & General, which it further tailored for AIB Group UK Pension Scheme.

Utilising its restructuring expertise, Legal & General will convert an existing longevity insurance agreement with the scheme into a pensioner buy-in.

This also marks the first use of Legal & General’s new APP solution, which allows pension schemes to partner with the insurer on the way to buy-in and selectively insure some of the pension risks associated with their scheme members.

The APP aims to provide pension schemes with greater certainty of reaching full buy-in over a planned timeframe, and reduces investment risk by providing protection against changes in asset yields, interest rates and inflation.

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“We are pleased to have been able to help AIB Group UK Pension Scheme in the latest stage of its de-risking journey and are proud to showcase our new Assured Payment Policy (APP) solution,” said Laura Mason, CEO of Legal & General Retirement Institutional (LGRI).

“Our team are always looking for new solutions for our clients to help them achieve their desired de-risking outcome in the most efficient way,” Mason added. “The APP structure was ideal for what the Scheme and AIB were working to achieve.”

Norbert Bannon, Chairman of the Trustee, also commented: “This transaction is another major milestone in de-risking the Scheme. It is the result of a collaborative process between the Bank and Trustee over many years, always with the clear objective of improving the security of members’ benefits.

The Trustee was advised on this transaction by Mercer and Sackers, while the bank was advised by Mercer, PWC and CMS. Legal advice was provided to Legal & General by Clifford Chance.

“This would not have been possible without the constructive input and advice of our advisors,” Bannon remarked. “The Trustee is appreciative of the cooperation and support it received from the Bank over the years.”

Finally, AIB Chief Financial Officer, Donal Galvin, stated: “The Bank is pleased with the outcome of material further de-risking of the UK Pension Scheme with no additional funding.”

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