Covering both deferred members and new retirees, this transaction marks the first time an APP has been partially converted into a new buy-in policy.
The conversion builds upon the original £250m APP transaction with the AIB Group scheme in 2019. This also follows the recent £400m APP transaction with the Legal & General Group UK Senior Pension Scheme in 2020.
The original transaction, and announced conversion, helps the AIB Scheme on its journey to full risk removal within planned timeframes. The innovative APP solution facilitates this by locking down investment-related risks and reducing volatility between the assets and bulk annuity pricing of the cashflows covered by the APP. As the APP already covered investment risk for the covered cashflows, the additional premium payable by the Trustee for the conversion was only in respect of the additional risks, principally longevity, that are now being passed to Legal & General.
The Trustee was advised on the transaction by Mercer, with Sackers providing legal advice.
Frankie Borrell, Head of Client Solutions, Legal & General Retirement Institutional: “We are delighted to have taken this important step with the AIB Group UK Pension Scheme, a market first. By entering into an Assured Payment Policy in 2019, the trustees and their corporate sponsor secured a more certain path to the pension scheme’s target destination. This transaction represents a key milestone on that journey.
“This first conversion also underscores how APPs can deliver meaningful benefits for many trustees and their scheme members in the months and years ahead.”
Norbert Bannon, Chairman of the Trustee, AIB Group UK Pension Scheme: “The Trustee welcomes the completion of the first annual conversion of the APP. This transaction represents further substantial progress in derisking the scheme and improving the security of members benefits. I would like to thank our advisors for their constructive input and advice throughout this process.”
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