Legal & General has simultaneously put in place separate longevity insurance arrangements for two BAE Systems pension scheme arrangements – The Royal Ordnance Pension Scheme and The Shipbuilding Industries Pension Scheme. The new arrangements cover a total of £1.7bn of liabilities as measured using the schemes' funding assumptions, or £1.8bn discounted at Libor, which protects the schemes against the financial risk of 17,000 members living longer than expected. The pensioners of the schemes will see no changes to the administration of their benefits.
This follows the £3.2bn, (£2.7bn on the Plan’s funding assumptions) arrangement implemented by Legal & General for the BAE Systems 2000 Pension Plan earlier this year. Legal & General estimates that these transactions have taken the total market volume for pensions insurance de-risking in the UK to in excess of £16bn in 2013. This demonstrates the increasing appetite of pension schemes and their sponsors, for insuring pension scheme risk, as well as Legal & General's position as a leading provider in the de-risking and longevity insurance market.
Tom Ground, Head of Legal & General's Bulk Annuity and Longevity Insurance business, said: "Legal & General is delighted to have worked with the Trustees of The Royal Ordnance Pension Scheme and The Shipbuilding Industries Pension Scheme, to put in place these arrangements and to assist BAE Systems in further de-risking its pension obligations. Legal & General has now insured over £7.5bn of pension scheme risk in 2013, including the acquisition of Lucida, and secured over 40% of the insurance de-risking business written across the market this year.
We remain committed to providing bespoke solutions to help both scheme trustees and sponsors achieve their de-risking objectives. Our ability to complete two longevity insurance transactions simultaneously is a reflection of our expertise and experience in this area and our track record of seeing processes through to completion quickly and efficiently ensures trustees get best value through the engagement we are able to obtain from reinsurers.”
Nigel Tinsley, Group Pensions Director at BAE Systems, said: "Following the success of the transaction we completed early in 2013, we are again pleased to have reduced the longevity risk exposure within another two of our pension scheme arrangements. We conducted a competitive selection process to appoint Legal & General in June and worked closely with Aon Hewitt to conclude the projects, quickly and efficiently."
Martin Bird, Senior Partner and Head of Risk Settlement at Aon Hewitt, said: "We worked closely with both sets of Trustees and with BAE Systems, to structure and execute the collateralised insurance arrangements. Notable features of these deals included structuring CPI linked longevity protection and developing an effective structure appropriate for the sectionalised nature of the Shipbuilding Industries Pension Scheme."
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