Legal & General (L&G) has completed a £325 million buy-in to Heathrow’s BAA Pension Scheme, covering 1,300 of the Schemes’ members.
The transaction accompanies the issuing of a £160 million long-dated, index-linked bond directly to L&G by the pension fund’s sponsoring employer, Heathrow Airport Holdings Ltd.
L&G worked in partnership with the Scheme’s Trustee, Heathrow and its advisers – KPMG, Mercer, Redington and CMS – to complete the buy-in. This long term investment is set to help Heathrow de-risk its legacy pension obligations and provide greater security to the Scheme members’ benefits.
Chief Executive Officer (CEO) of L&G, Retirement Institutional, Laura Mason, said, “This innovative transaction has generated genuine value, allowing Legal & General to deliver an attractive premium to the Scheme while enabling Heathrow to achieve the financing it needed.”
“The transaction highlights our ‘solutions driven’ approach towards complex client requirements, allowing all parties’ needs to be met.”
“Legal & General will continue to invest strategically in UK assets and infrastructure to support the pension promises that we take on from companies in the UK. We look forward to supporting the Trustee in future to secure more of their members’ benefits.”
Phil Wilbraham, Chairman of the Scheme Trustee, commented, “I am delighted with the completion of this innovative transaction with Legal & General, which at the same time de-risks the position of our Scheme members, enables Heathrow to strengthen their financing position ahead of our airport expansion and provides access to competitive financing for the benefit of passengers and airline customers.”
Head of Risk Transfer at Mercer and lead adviser on the bulk annuity transaction, Andrew Ward, stated, “We are delighted to have advised the Trustee on this ground-breaking transaction. By working closely with Legal & General and Heathrow, the Scheme has secured attractive pricing and a robust contract.”
Tom Seecharan, Head of Pension Insurance at KPMG, who advised on the bond and the overall de-risking strategy, concluded, “In a market where lots of good transactions are happening, this brilliant solution really stands out.”
“We are very proud to have supported in devising the strategy to de-risk at an opportune time and then to make a good outcome even better through achieving, for the first time, the bespoke design and implementation of a bond alongside a vanilla buy-in. A genuine win-win for all parties.”