The transaction makes use of a new solution Legal & General has developed and further tailored for this scheme in partnership with advisors for the Trustee and its sponsor, Allied Irish Banks plc (the “Bank”), the transaction is split between a £850m pensioner buy-in and a £250m Assured Payment Policy (“APP”).
For the AIB Group UK Pension Scheme, this transaction marks a significant point in its de-risking journey and its longstanding relationship with Legal & General, which included an intermediated longevity insurance agreement covering its pensioner members.
This existing longevity insurance has now been converted into a pensioner buy-in by utilising Legal & General’s extensive restructuring expertise.
This also marks the first use of Legal & General’s new solution, APP, which allows pension schemes to partner with the insurer on the way to buy-in and selectively insure some of the pension risks associated with their scheme members. The APP provides the pension scheme with enhanced certainty of reaching full buy-in over a planned timeframe. It locks down investment risk by providing protection against changes in asset yields, interest rates and inflation.
The Scheme’s asset management relationship with Legal & General Investment Management enabled a smooth asset transition.
The transaction was agreed at the end of 2019. The Trustee was advised on the transaction by Mercer and Sackers. The Bank was advised on the transaction by Mercer, PWC and CMS. Legal advice was provided to Legal & General by Clifford Chance.
Norbert Bannon, Chairman of the Trustee, said: “This transaction is another major milestone in de-risking the Scheme. It is the result of a collaborative process between the Bank and Trustee over many years, always with the clear objective of improving the security of members’ benefits. This would not have been possible without the constructive input and advice of our advisors. The Trustee is appreciative of the cooperation and support it received from the Bank over the years.”
AIB Chief Financial Officer, Donal Galvin, said: “The Bank is pleased with the outcome of material further de-risking of the UK Pension Scheme with no additional funding.”
Laura Mason, CEO of Legal & General Retirement Institutional (LGRI) said: “We are pleased to have been able to help AIB Group UK Pension Scheme in the latest stage of its de-risking journey and are proud to showcase our new Assured Payment Policy (APP) solution. Our team are always looking for new solutions for our clients to help them achieve their desired de-risking outcome in the most efficient way. The APP structure was ideal for what the Scheme and AIB were working to achieve.”
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