Rothesay Life has agreed a deal with Lehman Brothers International’s UK pension to insure £675 million ($1 billion) of liabilities in the country’s biggest de-risking transaction this year.
The deal follows an agreement struck in August between PricewaterhouseCoopers (PwC)—the administrators of the collapsed bank—and the trustees of the Lehman Brothers Pension Scheme about financing the deficit.
Although the contribution from Lehman Brothers International was not disclosed, in an update from the administrators on April 10 PwC said the payment was “not expected to exceed £120m”. However, Susie Daykin, pensions partner at Travers Smith, which advised the trustees, said the funding shortfall had been “significant”.
The buy-in is expected to become a full buy-out once the pension fund exits the Pension Protection Fund’s assessment period, which it entered in late 2008. Since this point, pension payments have been restricted in accordance with the rules of the UK’s defined benefit pension lifeboat fund, but these are expected to be lifted in July or August.
“Since the bankruptcy of Lehman Brothers in 2008, the trustees have been striving to secure the pension benefits promised to members of the scheme,” Peter Gamester, chairman of the trustees, said. “The agreement with Rothesay Life achieves this goal as it enables members’ defined benefit entitlements to be paid in full.”
Paul Belok, partner and risk settlement specialist at Aon Hewitt, said the transaction was “very complex given the detailed negotiations that have taken place regarding the shortfall in assets”.
“It is very pleasing to see this case reach a positive conclusion, especially given the many difficult issues that needed to be dealt with along the way,” Belok added.
Related Content: Two Weeks in September