Legal & General completes biggest ever UK bulk annuity with BA pension scheme

Legal & General Group has completed a £4.4bn buy-in for the British Airways pension scheme, Airways Pension Scheme (APS), covering nearly 22,000 pensioners, it announced on Thursday.

The FTSE 100 company said it was the largest ever bulk annuity policy arranged with a UK pension scheme, and also included the conversion of existing longevity insurance into a bulk annuity.

As it announced at its half year results, the UK pension risk transfer (PRT) market continued to demonstrate a “high level” of activity, with Legal & General actively quoting on more than £20bn, of which more than £7bn were in exclusive negotiations at the time.

Since then, Legal & General said it had completed £4.8bn of UK PRT transactions, including the APS buy-in, and was now actively quoting on £27bn of UK PRT deals.

Additionally, the company said it had continued to show “strong momentum” in international PRT, completing £191m of transactions since the end of June.

In aggregate, Legal & General said it had completed £6bn of global pension de-risking transactions in the year to date, of which UK PRT made up £5.3bn, international PRT was £0.4bn, and longevity insurance totalled £0.3bn.

The financial metrics and Solvency II capital strain of those transactions was said to be in line with previous levels reported by the firm.

“I'm delighted that Legal & General has transacted the largest bulk annuity to date in the UK for British Airways' pension scheme,” said Legal & General group chief executive Nigel Wilson.

“As we indicated at the half year results, the second half of 2018 is likely to be a record six months for our PRT business and we expect to announce further transactions in the next few months.”

Wilson said the company was “actively quoting” on £27bn of UK PRT deals, which he said demonstrated “strong demand” for insurance, supported by increasing affordability, as trustees seeked to improve security for members and companies looked to remove legacy liabilities.

“Legal & General's combination of longevity and investment management expertise uniquely positions us to deliver at scale, providing solutions that benefit schemes and their members.”

Laura Mason, chief executive officer of Legal & General Retirement Institutional, added that the business was “proud” to have delivered the transaction - the largest bulk annuity transaction completed in the UK market.

“This is a great example of Legal & General delivering for UK companies and their pension members, enabling pension schemes to provide security to their pensioners in retirement,” Mason explained.

“This transaction also included the conversion of existing longevity insurance to a bulk annuity, demonstrating Legal & General's ability to deal with a complex situation and offer innovative solutions drawing on the broad experience and capabilities of the wider Legal & General Group.

“The depth and scale of our retirement business means that we can confidently deliver for APS scheme members, whilst maintaining capacity for further de-risking activity in the near term.”