LCP has advised the Trustee of the Marks & Spencer Pension Scheme (the Scheme) on the purchase of two pensioner buy-in policies with Phoenix Life and Pension Insurance Corporation (PIC) totalling approximately £1.4bn.  The buy-in with PIC (£900m) is the largest pensioner buy-in executed by any pension scheme so far this year.

These transactions follow execution of two similar buy-ins in March 2018 with Aviva and Phoenix Life.

LCP’s role as execution adviser on all these transactions has been part of its wider appointment to advise the Trustee on its strategy to reduce the Scheme’s longevity risk. Linklaters provided legal advice for the transactions.

All buy-ins purchased to-date by the Trustee have been executed using umbrella master agreements and transaction schedules, allowing the Trustee to move quickly to purchase additional buy-ins when pricing opportunities arise.  This structure meant the second buy-in with Phoenix Life was executed in minimal time and at minimal execution cost, demonstrating the efficiency of the approach.  The Trustee was therefore able to focus on bringing in PIC as a new insurer, while meeting demanding deadlines in turbulent markets earlier this year.

Graham Oakley, Chair of the Trustee Board, commented “We are delighted to have secured approximately £1.4bn of additional buy-ins at attractive pricing.  We have executed with one of our incumbent insurers and welcomed a new insurer onto our panel of buy-in providers.  Through a collaborative approach with the Company, the Trustee continues to reduce risk in the M&S Pension Scheme, improving the security of all members’ pensions in the Scheme.”

Myles Pink, Partner at LCP, said: “The cost of longevity risk removal remains attractive to many pension schemes. The M&S Pension Scheme has been able to take another step to remove this and other risks, benefiting from the thorough preparatory work carried out for its initial buy-in transactions.  We expect 2019 to be a record year for bulk annuities and the M&S Pension Scheme has demonstrated how well-prepared pension schemes can jump to the front of the queue.”