Two deals show evolution of bulk annuity market
Pardon the Interruption
This article is just an example of the content available to mallowstreet members.
On average over 150 pieces of new content are published from across the industry per month on mallowstreet. Members get access to the latest developments, industry views and a range of in-depth research.
All the content on mallowstreet is accredited for CPD by the PMI and is available to trustees for free.
The NSK Pension Scheme has completed a £309m buy-in marking M&G’s third deal since 2023, while the Menzies Pension Fund has bought in benefits with Just Group, in a £260m deal involving illiquid assets and premium deferral.
M&G books third deal since market re-entry
The transaction for NSK UK, a manufacturer of ball bearings, covers 3,700 pensioners and deferred members of the scheme and was completed with M&G, insured through its subsidiary the Prudential Assurance Company. M&G re-entered the bulk annuity market last year with two transactions worth a combined £617m, one of them for its own staff scheme.
The trustees were advised by Aon and CMS, while Mercer acted as lead advisers for NSK Europe, with legal advice to the sponsor provided by Shoosmiths. Law firm Hogan Lovells gave advice to M&G.
Trustee chair Steve Metcalfe said insuring members' benefits has been a goal for the trustees and company.
“To achieve this key aim within the required timescales was challenging, but the [trustees] were expertly supported thanks to Aon and CMS’s deep knowledge of the insurance market, allied with a collaborative approach across all parties.”
Senior consultant at Aon, Chris Dunford, said the transaction was completed within the client’s required timescales, adding: “Working closely with the company’s and trustee’s advisers, and the administrators was the key to this successful outcome, as well as the flexibility and responsiveness shown by all involved.”
Chief finance officer at NSK Europe, Mark Trivett, commended the trustees, advisers and M&G for their teamwork, calling the deal “a major milestone in our collaborative approach with the trustee to reduce risk over the years”.
‘Complex’ deal with illiquid asset sale and deferred premium
Elsewhere, the Menzies Pension Fund completed a £260m buy-in with Just in March, covering more than 1,650 deferreds and nearly 1,400 pensioners. Menzies, sponsored by airport ground-handling company John Menzies, previously bought in pensioner members in 2018.
Just called the transaction “complex” as it included a secondary market sale of an illiquid asset and deferral of premium, to enable the buy-in shortfall to be met by continuing with the existing contribution schedule.
Professional trustee at Bestrustees Bob Hymas, who sits on the Menzies trustee board, said Just worked flexibly with advisers to determine a price lock and premium deferral structure that “dovetailed with the scheme’s funding plan”.
The deal was advised by LCP, with Brodies giving legal advice to the trustees and Gowling WLG advising Just.
“This transaction shows it is possible to build a strategy balancing the options available for a scheme across the insurance and secondary market for illiquid assets to give the trustee a clear route to achieving their objective,” said Ruth Ward, principal at LCP.
