How asbestos scheme completed biggest ever buyout with L&G
Friday, November 11, 2011
Legal & General has announced the signing of a £1.1bn bulk annuity contract with the pension scheme of bankrupt asbestos producer Turner & Newell
The agreement is the biggest ever of its kind in the UK. It will see Legal & General move the scheme's entire assets into an annuity matching portfolio and the insurer back up Turner & Newell's pension commitments with their annuities.
Tom Ground, a key Legal & General architect of the deal spoke to Pension Funds Insider on how the insurer pulled off the huge deal.
He said that the trustees of the Turner & Newell scheme had been negotiating with potential buyout providers since 2009. After its sponsor went bankrupt in 2001, the fund left a PPF assessment period in 2006 as the scheme was too well funded to receive PPF protection.
Legal & General were then selected as the preferred provider for exclusive negotiations with the trustees this April. This period involved the insurer taking charge of the scheme's investments as 'delivery agents' from June in order to ready the portfolio for a transfer onto Legal & General's books and sign the agreement.
Ground said: "To get this amount of money into an annuity-matching portfolio has made it a complicated and large transaction. It was only facilitated as Legal & General have both an industry-leading fund management arm and industry-leading annuity provision, this combination makes us difficult to emulate."
Ground said the new record for a buyout transaction could be bettered in the future. He said that "there are plenty of schemes that are bigger out there and there are is no reason why they can't be bigger buyout deals. Larger deals are more complex though, so many bigger schemes would look at a phased buy-in rather than a buyout."
The £1bn mark has up to now been viewed as somewhat of an unofficial ceiling in the buyout market, Pension Corporations's Jay Shah told Pension Funds Insider in May.
Mercer consulted the Turner & Newell scheme over the deal, and Allen & Overy provided legal advice.
First published 25.10.2011
dbillingham@wilmington.co.uk
