The trustee of the ICI pension fund has completed £9bn of buy-in deals in two years, it has been revealed

ICI has received guidance on eleven bulk annuity insurance policies, or buy-ins, which, over a two and a half year period, has significantly de-risked the Fund in an unparalleled time frame. Beginning in March 2014, a total of £9bn of liabilities have been covered to date.

The deals were carried out with three insurers with whom Allen & Overy negotiated “umbrella” agreements to speed up the process.

Prior to this structure, typical buy-in policies would take many months to negotiate, in which time pricing could change dramatically.

An example of how the new method benefited the trustee was a £750m deal that was finalised in just two weeks after the Brexit vote. This allowed the trustee to take advantage of the uncommon market conditions.

The fund currently provides pensions to around 50,000 members, and so the insurance policies enable the scheme to deliver payments to cover a large proportion its liabilities.

The transactions ultimately reduce risk within the fund by maintaining an income without investment, longevity or inflation risk which can be obtained from investment in non-matching asset classes.

Allen & Overy pensions partner Neil Bowden said: “It has been a real privilege to help the trustee on its recent journey, insuring £9bn of pension liabilities over the past two-and-a-half years. The key moment was putting in place an umbrella contract with insurers that has allowed eleven separate deals over that time. The trustee has also worked incredibly hard on its governance and planning processes to ensure that it can meet the commercial timetables that are often difficult for trustee clients.”

Allen & Overy insurance partner Philip Jarvis added: “A number of the individual deals in this series are ground-breaking in their own right, both in terms of size and speed of execution. When put together in such a short space of time they show a wholly new approach to managing risk in a UK pension scheme.”

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