The AA Pension Scheme is undertaking a gradual de-risking programme, and as part of this approach it has secured a £351m bulk annuity with Canada Life. This is the insurer's largest bulk annuity transaction announced to date.
The auction process for the deal was structured to allow competitive bids to be provided efficiently, but with the final size of the annuity determined after attainable pricing had been assessed. This allowed the transaction size to be increased late on in the process once it was clear that the price was going to be acceptable to the scheme and to the AA. The annuity was also designed to support follow-on annuity purchases in the future whenever they are affordable.
The transaction was run by Aon using its market-leading Compass platform, which is designed to enable a quick transaction from a winning bid, while all legal advice to the scheme was provided by Hogan Lovells International LLP.
Steve Delo, Trustee Chairman of the AA Pension Scheme, said: "We are very pleased to implement this key step in our de-risking plan and we are grateful for the excellent advisory support from Aon and Hogan Lovells. This produced a swift end-to-end conclusion to the deal and delivered highly competitive pricing. This transaction has had a positive impact on the funding of the scheme while producing a reduction in risk."
Hannah Cook, Risk Settlement adviser at Aon, said: "Flexibility in the annuity structure, using Aon’s Compass platform and the trustees' ability to deal quickly and thoroughly in all stages of the auction, has produced a strong result. The Canada Life team showed great commitment to a tight timeline during their busiest period.”
Richard Priestley, Executive Director at Canada Life, said: "We are proud that the trustees chose Canada Life in a highly competitive auction, and believe the significant business placed with us this summer shows our strong capabilities and overall commitment to this market. The auction process allowed a transaction at the client's optimal size for the terms available."
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