UK manufacturing giant ICI has obtained a further two buy-ins
for its pension fund, securing £980 million ($1.2 billion) of benefits.
Legal & General took on £390 million, while Scottish
Widows—which has been active in the UK market for less than a year—insured
The ICI Pension Fund has completed buy-ins worth £2.5
billion this year alone, reported consultant LCP, which advised on the deal.
This brings its total transactions to 11, covering 75% of liabilities, since it
began an innovative process of de-risking in 2013.
Wellsteed, partner at LCP, said ICI had saved “well over £100 million over
the past two years” through its standardized contracts and panel of insurers.
“With a knowledgeable and proactive trustee board,
well-rehearsed processes, and umbrella contracts with insurers already in
place, we have been able to achieve considerable savings in insurer pricing,”
Heath Mottram, CEO of the ICI Pension Fund, said his fund’s
method could become “a blueprint for how larger schemes will insure their
liabilities at scale through buy-ins in the future.”
Mottram and his team have divided the fund into tranches,
with each one insured separately when the trustees are able to secure the best
price. Most notably, the fund insured £750
million with Legal & General eight working days after the UK’s
referendum on European Union membership, saving £10 million on the price due to
favorable market movements.
“We have seen an increase in insurer appetite and activity
since the EU referendum in June,” Wellsteed added. “For schemes that are
holding bonds or gilts or have hedged interest rates, there are compelling
opportunities to de-risk at attractive levels through buy-ins and this is
generating significant interest from schemes we are speaking to.”
Boosts £230M Buy-In & Philips
Seals UK’s Biggest Ever Full Buyout