Pension Insurance Corporation plc (PIC), the specialist insurer of defined benefit pension funds, has concluded a full buy-in deal with the pension plan of investment banking firm Dresdner Kleinwort, covering £1.2 billion of liabilities.
The full buy-in covers the whole pension plan but is split across smaller transactions, consisting of a £900 million buy-in for the final salary section of the plan, and £300 million for the money purchase section.
The transaction allowed members in the money purchase section with hybrid defined contribution (DC) and defined benefit (DB) benefits to choose to transfer their benefits to an alternative arrangement, or to convert them into pure DB benefits.
“Given the unusual hybrid DC and DB benefit structure the Trustees required flexibility from us to ensure that both sections of the Plan were insured in line with their requirements,” said Uzma Nazir, Head of Origination Structuring at PIC
“We are of course delighted to complete this, the biggest transaction of the year so far and one of the largest to date,” she continued.
“Affordability of buy-ins and buy-outs has improved significantly in the past year and this is driving a record number of schemes and companies seeking to insure in full.”
LCP acted as lead adviser on the transaction and legal advice was provided by Linklaters.
The Dresdner Kleinwort Pension Plan is part of international commercial bank Commerzbank AG following the acquisition of Dresdner Bank in December 2009.
“We are very pleased to have completed the insurance of both sections of the Plan with the support of Commerzbank,” said David Curtis, who represents LawDeb Pension Trustees as Chairman of the Trustees
“This transaction required a high level of creative thinking by our advisers, LCP, in designing a structure combining the member choice programme with the insurance transaction,” he added.
“I want to thank PIC for their flexibility, especially in relation to the insurance of the Money Purchase Section, which is an unusual transaction, and, I believe, a great result for the membership.”
David Salter, partner in LCP’s de-risking practice and lead advisor, also commented: “We are pleased to have used our expertise to design a structure that provided members with flexibility and a high level of certainty over their options, whilst dovetailing with the insurance transaction to give the Trustees and Commerzbank cost certainty.”
