M&G has announced a £331m buy-in transaction of the M&G Group Pension Scheme, one of the group’s own pension schemes, as well as a £286m bulk annuity transaction for an external scheme.
The buy-in was insured through M&G's wholly owned life and pensions subsidiary Prudential.
M&G said it had also completed a £286m bulk annuity (BPA) transaction for an external scheme. The whole scheme buy-in for the M&GGPS secured the benefits of 1,414 pensioner and deferred members.
M&G said active members were given the choice of either continuing with defined benefit accrual in a different M&G group pension scheme or becoming part of the bulk purchase transaction and joining a defined contribution arrangement for the future, with the timing of the buy-in closely aligned with that of the transfer to ensure the best outcome for all members.
M&G said it worked with the trustee and its advisers to enable a transfer of the pension scheme’s illiquid assets to Prudential as part of the transaction.
The trustee was advised on the transaction by Aon as risk settlement adviser and the scheme actuary, Hymans Robertson acted as investment adviser. Mayer Brown International LLP was the legal adviser while Eversheds-Sutherland provided legal advice to M&G.
Member security
Andrea Rossi, group chief executive, M&G plc said: “I am delighted that we have been able to create bespoke solutions to meet the needs of these two schemes. Combining our deep expertise in asset management and insurance capabilities was key for these transactions.”
Mark Thompson, chair of trustee M&GGPS, said: “We are pleased to have achieved this significant step that will provide greater security for members’ benefits. The collaborative approach between the Trustee, M&G and our advisers has meant that we have been able to insure our members’ benefits sooner than we expected and so this is a very positive outcome.”
Hannah Brinton, lead adviser, Aon: “This transaction involved a high degree of complexity and required careful collaboration across many stakeholders. We are extremely pleased to have supported the trustee throughout, enabling them to proceed with the transaction with confidence regarding the future security of members’ benefits.”
Will other insurers follow
Mike Edwards, partner at Aon said that as more schemes approach full funding Aon expect continued innovation in this area.
Edwards said: "M&G’s entry to the UK bulk annuity market will provide additional capacity and competition and this is most definitely welcome with demand from pension schemes for bulk annuities at an all-time high.
He said Aon had a strong track record of advising on transactions with new market entrants, having led the trustee advice on the Phoenix Group’s transactions with its own pension scheme in 2016 and 2019.
"These kinds of transactions present unique challenges for both Trustees and advisers and require strong collaboration between all parties.
We are aware of a number of other prospective new insurer entrants looking at the market and, whilst the lead in time for this can be lengthy, we might reasonably expect others to start quoting on transactions over 2024.”
