The BP Pension Fund has secured a £1.6bn buy-in with Legal & General (L&G), although concerns around past pension increases are still ongoing, with the BP Pensioner Group expressing disappointment over the news.

The deal, which marks the first de-risking transaction for the £18bn pension fund, required close collaboration between the two parties, including agreeing terms to further support the security of members’ benefits.

L&G was also able to provide a gilt-based price lock using the fund’s gilt holdings, which ensured price certainty while the terms of the transaction were finalised, and aided in the smooth execution of the deal during a period of elevated market volatility.

The trustee received advice from Aon, the lead transaction adviser, while Linklaters provided legal advice and Cardano provided insurer covenant advice. Mercer acted as scheme actuary and Redington provided strategic investment advice to the trustee.

Macfarlanes and DLA Piper provided legal advice to L&G.
 
Commenting on the deal, trustee chair, Brendan Nelson, said: “This buy-in follows a detailed review of the options available to support the fund’s de-risking journey and hence the security of members’ accrued benefits.

"On behalf of the board, I’d like to thank L&G for their collaboration throughout our journey from initial exploration to concluding this transaction, and our advisers for their support."

Adding to this, L&G institutional retirement CEO, Andrew Kail, said: “We are delighted to have completed this buy-in with the Fund, which supports the fund’s trustee in its management of risk.

"A huge thanks to everyone involved for their hard work on the transaction, and to the trustee for its positive engagement during a thorough selection and implementation process.”
  
However, a spokesperson for the BP Pensioner Group, which comprises more than 3,000 members of the BP Fund, expressed disappointment over the deal, emphasising the need to address existing issues before moving to buyout.

“We are disappointed that the trustee is focused on transferring fund assets to insurance companies while pensions paid to members have been eroded by 11 per cent despite the fund having a record surplus of almost £4bn," they stated.

"This is a matter that is subject to a complaint by fund members to be put before the pensions ombudsman shortly.

"Buy-in arrangements are often the precursor to the full buyout of the members’ fund by an insurance company. It is important that trustees keep members fully informed of any plans they may have to transfer their fund to a third-party.”

The dispute between BP Pensioner Group and the company centres around decisions made by BP and the Pension Fund Trustee in 2022 and 2023, which, according to the BP Pensioner Group, led to an 11 per cent fall in the value of the pension in real terms in two years.

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