Legal & General, British Airways Cut Largest UK Bulk Annuity Deal

The financial services company will take over $5.7 billion of the airline’s pension liabilities.

Legal & General, a financial services provider specializing in insurance, pensions, and investment management, will assume £4.4 billion ($5.7 billion) of British Airways’ pension liabilities in the UK’s largest bulk annuity deal.

The deal, announced Thursday, shields the airline from a growing pension hole, which may continue to expand due to poor returns and life expectancy increases among beneficiaries. The business has struggled with its liabilities for years.

The Airways Pension Scheme (APS), the defined benefits plan Legal & General will assume, had £7.7 billion in liabilities, resulting in a £469 million deficit at the end of 2017, the annual report shows.

British Airways froze its defined benefits plans last year, creating a defined contribution plan with flexible benefits in their place. The new plan, known as the British Airways Retirement Plan, launched in April.

Legal & General’s deal will cover nearly 22,000 beneficiaries, or 60% of the airlines’ pension liabilities. Each beneficiary will receive an annuity payment.

Legal & General and British Airways will complete additional transactions designed to remove legacy liabilities in the coming months, Nigel Wilson, the financial service’s chief executive, confirmed. He expects the second half of this year to be “a record six months” for its pensions risk transfer business.

Virginia Holmes, APS’s chair of the plan’s trustee, said the bulk annuity was the latest deal to insure benefits against longevity and financial risks as well as improve their security. She also reassured members that their pensions will continue to be paid at the same rate as before.

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