British Airways has agreed on a £4.4bn buy-in with Legal and General for its Airways Pension Scheme (APS), the largest bulk annuity transaction ever completed in the UK market.

The deal will cover around 60 per cent of all the scheme’s pensioner liabilities. The transaction accounts for existing longevity reinsurance contracts of circa £1.7bn that APS entered into via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement.

Following the completion of the £4.4bn buy-in transaction and allowing for previous pensions insurance transactions, APS is now 90 per cent hedged against all longevity risk. Scheme trustee chair Virginia Holmes said the transaction is the latest in a number of insured arrangements entered into by the APS.

“It demonstrates the vision and determination of the trustee to reduce risk and increase security for members. Today’s announcement is the culmination of much hard work undertaken over several months and we are pleased to be taking this significant step in the Scheme’s de-risking journey.”

The APS Trustee worked with PwC as lead transaction advisers to identify and secure an attractive buy-in pricing opportunity. Allen & Overy, Eversheds Sutherland and Willis Towers Watson advised the trustee throughout the process. Legal & General were advised by Clifford Chance.

Commenting, L&G Retirement Institutional Laura Mason said: “We are very pleased to have been able to work with the British Airways Pensions team and to have completed this ground-breaking transaction. It is a great example of how Legal & General is helping trustees secure their members’ benefits through our ability to manage complex circumstances and offer flexible solutions.

“Today’s transaction was the culmination of a long period of engagement with the Trustee and its team and was the result of many individuals’ collaborative engagement and efforts. We look forward to building on our relationship with the British Airways Pensions team and further supporting them in delivering for the members of APS.”

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