The £650m ICI Specialty Chemicals Pension Fund has undertaken a £140m buy-in transaction to cover the scheme’s remaining uninsured pensioners.
The transaction, carried out by Pension Insurance Corporation (PIC), is the company’s third following two buy-ins last year with Prudential: one for £215m in August and a further top-up of £16m in November.
The trustee was advised by Lane Clark and Peacock (LCP) and Squire Patton Boggs. PIC was advised by Herbert Smith Freehills.
Trustee chairman Alan Bates said: “We are delighted to have completed this buy-in, which covers current remaining uninsured pensioner benefits within the fund. This is part of a de-risking strategy which has allowed us to complete this transaction despite the current uncertainty in the markets. PIC were flexible in helping us achieve our aims and I want to thank them and the fund’s advisers for their hard work.”
PIC actuary Mitul Magudia said: “We are pleased to have been able to help the trustees with this de-risking exercise, highlighting the attractiveness of buy-ins as a matching asset in place of gilts. Schemes such as the ICI Specialty Chemicals Pension Fund have been diligently de-risking over the last few years, recognising the benefits of hedging interest rate and inflation risk. These schemes now find themselves able to secure pensioner buy-ins, having been immunised from recent falls in interest rates.”
LCP partner Charlie Finch added: “The £140m buy-in achieves a material risk reduction for the fund and has been secured at a price which reduces the expected cost of providing members’ benefits. This is the seventh buy-in over £100m that LCP has completed since the EU Referendum in June, reflecting a sharp increase in activity in the second half of 2016.”
