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The BAL section of the TUI Group UK Pension Trust completed a £370m buy-in late last year, meaning the section is now fully covered. About £30m of the premium has been deferred for two years so the scheme can run off its illiquid assets.
The deal with Legal & General follows a £610m partial buy-in with the same insurer in 2021, when the pension trustees of the travel group also completed a £184m full buy-in for the TAPS section.
The trustees and L&G monitored pricing for a period of 18 months after the first transaction, according to the insurer, to achieve affordability and efficiency.
LCP was the lead adviser to the trustees for this deal, as well as providing actuarial and investment advice. Linklaters gave legal advice, while Isio and Herbert Smith Freehills advised scheme sponsor TUI. Legal & General used law firm Macfarlanes.
“Securing the benefits for our members has been the aim of the trustee for many years, and we are delighted to have achieved another successful transaction,” said trustee chair Mike Roberts from Pan Trustees.
TUI’s group pensions manager Nick Dunk said: “Following a collaborative process working with the trustee, we are pleased to have completed a further transaction in respect of the trust as part of our derisking journey. We have now worked to fully insure the liabilities of two sections of the trust, which provides further security for both members and TUI.”
Adrian Somerfield, director institutional retirement at L&G, said: “Working collaboratively with the trustee, sponsor and their advisers, we helped implement an efficient solution for the scheme’s illiquid investments and now look forward to supporting the members over the long term.”
L&G recently announced a £1.4bn buy-in with the Sanofi Pension Scheme.
Last year saw close to £48bn worth of transactions in the bulk annuity market, according to consultancy XPS Group, as well as two very large buy-ins for NatWest Group, with more than 250 deals completed.
There were several developments as Utmost Group entered the market and M&G concluded a first deal under its new ‘value share’ proposition, where sponsors benefit from investment upside. In addition, Canadian investment behemoth Brookfield is expected to enter the UK buyout market this year with Blumont Annuity Company, even as it is already the indirect owner of Utmost.
The government plans to allow scheme sponsors to extract surplus from ongoing schemes after agreement from trustees, with proposals due in spring. This could potentially lead some companies to run their schemes on for longer.
For now, companies that use DB surplus tend to do so for making money purchase contributions within hybrid trusts, including Aon and Schroders, potentially due to the 25% tax charge on return of surplus.
Are you expecting the buy-in/buyout market to slow down if surplus extraction becomes easier?
