An unnamed UK pension scheme has agreed a £500m bulk purchase annuity (BPA) transaction with M&G, in what is thought to be the market's first BPA deal to share value with a corporate sponsor.

The deal, which secured retirement benefits for around 3,200 members, was completed using M&G's newly launched Value Share BPA proposition, which is an alternative to a traditional buy-in.

The first of its kind structure is designed to allow trustees to insure the scheme in exactly the same way as a traditional buy-in transaction, whilst also allowing corporate sponsors to participate in the risk and reward generated from insuring their well-funded UK pension scheme.

M&G’s wholly-owned subsidiary, the Prudential Assurance Company Limited, acted as the insuring entity, although a captive reinsurer was 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, while legal advice was provided to the sponsor by CMS and to M&G by Eversheds. The trustee was advised by Mercer and Macfarlanes.

The captive reinsurer, meanwhile, received advice from Carey Olsen, Marsh McLennan (Oliver Wyman and Mercer) and PwC, and will use SRS Management Guernsey Limited as their insurance manager.

M&G life insurance CEO, Clive Bolton, said that the "ground-breaking" Value Share BPA transaction provides 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," he continued.

“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.”

Adding to this, PwC partner, Alison Fleming, said: “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."

Including this latest transaction, M&G has now written around £1,400m of new business since re-entering the bulk annuity market in September 2023.

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