Pearson completes £500m L&G buy-in

The Pearson Pension Plan has completed a further £500m buy-in with Legal & General Assurance Society (L&G).

The new transaction means that around half (£1.8bn) of the Pearson Pension Plan's liabilities are now insured.

This is not the first time Pearson has completed a buy-in with L&G; the education firm purchased pensioner buy-in policies in October 2017 with Aviva and L&G, in deals worth a total of £1.2bn.

Pearson secured the deal to transfer further longevity risk to L&G, reducing its pension risk and providing additional security for members.

The terms of the buy-in will be the same as in the 2017 transaction, as that deal stipulated that any future buy-ins could use the same terms so that the trustee could move quickly to take advantage of insurance contract pricing.

These terms were that monthly payments to the Pearson Pension Plan would be made equal to the future pensions for approximately 50 per cent of the plan’s liabilities, to reduce the risk that Pearson will be required to contribute additional money to the pension plan in future and contain features to provide additional security beyond what is available as standard.

Commenting on the deal, LCP partner and lead adviser to the trustee, Clive Wellsteed said: “The Pearson Plan conducted the largest buy-ins of 2017 at £1.2bn and set up umbrella contract structures to allow quick follow on transactions that benefit from the same attractive terms as the initial buy-ins.  

“The ease of execution under the umbrella contract meant a win-win for the trustee, who was able to lock in attractive pricing relative to the very latest longevity trends, and L&G who got off to a strong start to 2019.  The trustee was able to complete the transaction about two weeks after receiving pricing.” 

LCP was lead adviser to the trustee on the buy-in transactions and legal advice was provided to the Trustee by Linklaters.

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