M&G has launched a Value Share Bulk Purchase Annuity (BPA) proposition by completing a £500 million transaction with a private Corporate Sponsor and its UK Pension Scheme, insuring around 3,200 pensioner and deferred members.
This newly launched Value Share BPA proposition’s structure reportedly allows Trustees to insure the Scheme members in the same way a traditional buy-in transaction does, while also allowing Corporate Sponsors to participate.
Clive Bolton, Life Insurance CEO, M&G, commented, “This ground-breaking Value Share BPA transaction provides approximately 3,200 pension scheme members with the ultimate security of a buy-in, while sharing the financial risk and upside with the Corporate Sponsor.
“This significant de-risking milestone has been made possible thanks to the strong alignment of interests, collaboration and commitment between all parties involved. By completing the first-ever BPA transaction that shares value with the Sponsor, we are showcasing our ability to create innovative solutions that address our clients’ requirements.
“This has the potential to transform the market by providing an alternative option for sponsors of large UK pension schemes to consider as part of their de-risking endgame. We look forward to working with clients and advisers as we tailor this solution to meet the needs of Corporate Sponsors whilst securing the future pensions for the Scheme members.”
According to M&G, the insuring entity is The Prudential Assurance Company Limited (PAC), which is its wholly-owned subsidiary offering life and pension solutions.
A Captive Reinsurer was additionally established in Guernsey to participate in both the upside and downside of the buy-in transaction alongside PAC.
PwC acted as lead transaction adviser, including advising the Corporate Sponsor on the buy-in and captive implementation. Meanwhile, legal advice was provided to the Sponsor by CMS and to M&G by Eversheds.
The Trustee was advised by Mercer and Macfarlanes, and the Captive Reinsurer received advice from Carey Olsen, Marsh McLennan (Oliver Wyman and Mercer) and PwC, and will use SRS Management Guernsey Limited as their insurance manager.
Alison Fleming, Partner, PwC said, “We are thrilled to have supported the Sponsor as lead adviser on this transaction, including both the buy-in and the structuring, set up and commercials for the Captive Reinsurer.
“Implementation of this ‘first of its kind’ structure is the culmination of our work with the Sponsor on pensions over a number of years. The solution we have achieved ultimately enables the Trustee to achieve their derisking objectives and secure members’ benefits, whilst enabling the Sponsor to access risks and rewards that would be passed to an insurer in a more traditional transaction.
“We would like to acknowledge the hard work and collaboration from the Sponsor, Trustee, M&G and all the other advisers on this transaction.”
Deborah McWhinney, Risk Transfer Principal, Mercer, added, “The Mercer team is very proud to have guided the Trustee on their journey to fully secure member benefits in our roles of Risk Transfer specialist, Scheme Actuary and Investment Adviser.
“The Value Share BPA transaction represents an impressive outcome for the Trustee Board and reflects their dedication in achieving their de-risking objective for their members.”
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