Life insurer Legal & General (L&G) has agreed a £570 million pensioner buy-in transaction with the DB (UK) Pension Scheme, which is sponsored by a subsidiary of Deutsche Bank AG.
The buy-in represents the first step on the Scheme’s de-risking strategy of reaching full insurance over the medium term with the objective to increase the security of members’ benefits, and reduce risks for the Scheme and Deutsche Bank.
This transaction was completed under an umbrella contract, allowing future transactions with L&G to be completed quickly and easily on pre-agreed terms when favourable pricing opportunities arise.
L&G notes that the Scheme has assets of c. £4.5 billion and has a funding surplus.
LCP provided strategic longevity de-risking advice to the Trustee, and also worked with the Trustee and Deutsche Bank when considering de-risking options, including the agreed phased buy-in approach.
CMS provided transaction legal advice to the Trustee and also worked alongside LCP on the execution of the initial transaction.
Insurance and reinsurance broker Aon acted as scheme actuary and investment adviser, and Slaughter and May as ongoing legal adviser. Eversheds Sutherland provided legal advice to L&G.
Aysha Patel, Director, Legal & General Retirement Institutional, commented: “We’re very pleased to have completed this initial transaction with the Trustee of the DB (UK) Pension Scheme. The appointment of Legal & General Investment Management as the Scheme’s LDI manager and this subsequent buy-in highlights our expertise in assisting schemes at all stages of their de-risking journey.
“We look forward to continuing our relationship with the Trustee and Bank and providing additional security to their pension scheme members.”
Michael Wrobel, Chair of the Trustee Board, DB (UK) Pension Scheme, said: “We are very pleased to conclude this first buy-in. It is a significant step on our de-risking journey and the excellent outcome with Legal & General reflects the expertise and collaborative approach of our advisers and our close working relationship with the Bank. It establishes a strong platform for future de-risking of the Scheme.”
Jeremy Sowden, Head of Pensions and Benefits UKI, Deutsche Bank AG, added: “This transaction enables Deutsche Bank to hedge a material portion of the liabilities of Scheme, and we will work closely with the Trustee Board to evaluate future de-risking opportunities.
“We have a very strong working relationship with the Trustee Board and this transaction represents a continuation of that productive partnership. It is part of the ongoing journey to reduce risk in relation to our defined benefit pension obligations, benefitting the Scheme members, the Trustee Board and the Bank.
“A number of metrics and objectives were jointly agreed by the Bank and the Trustee Board at the outset and this transaction delivers on those.”
While David Fink, Partner, LCP, noted: “I am delighted that we could bring our experience to bear to help the Trustee and Deutsche Bank successfully complete the first buy-in on their de-risking journey.
“They follow other large schemes whom we have helped develop phased buy-in strategies. We believe a targeted, intelligent strategy using umbrella contracts is going to increasingly be the norm for large schemes.”