AIB pension scheme converts 20% of APP to £61m buy-in with L&G

The Allied Irish Banks (AIB) Group UK Pension Scheme has agreed a £61m deal with Legal & General (L&G) Assurance Society, converting around 20 per cent of its existing assured payment policy (APP) into a buy-in policy.

The transaction did not require any additional funding from the scheme’s sponsor, AIB Plc, and marks the first time that an APP has been partially converted into a new buy-in policy.

It builds upon the original £250m APP transaction completed by the scheme in 2020, which was the first use of L&G's APP solution, with L&G's own UK Senior Pension Scheme later completing a £400m APP transaction in 2020.

The transaction is expected to help further facilitate the scheme’s journey to full risk removal within its planned timeframes by locking down investment-related risks and reducing volatility between the assets and bulk pricing of the cashflows covered by the APP.

The APP already covered investment risk for the covered cashflows, which meant that the additional premium payable by the trustee for the conversion was only in respect of the additional risks, namely longevity, that are now being passed to L&G.

Commenting on the deal, AIB Group UK Pension Scheme chairman, Norbert Bannon, said: “The trustee welcomes the completion of the first annual conversion of the APP.

“This transaction represents further substantial progress in de-risking the scheme and improving the security of members benefits. I would like to thank our advisers for their constructive input and advice throughout this process.”

L&G Retirement Institutional head of client solutions, Frankie Borrell, added: “We are delighted to have taken this important step with the AIB Group UK Pension Scheme, a market first.

“By entering into an APP in 2019, the trustees and their corporate sponsor secured a more certain path to the pension scheme’s target destination. This transaction represents a key milestone on that journey.

“This first conversion also underscores how APPs can deliver meaningful benefits for many trustees and their scheme members in the months and years ahead.”

The trustee was advised throughout the transaction by Mercer, with Sackers providing legal advice.

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