The ICI Pension Fund has revealed it saved £10m by completing its latest buy-in with Legal & General (L&G) shortly after the EU referendum.
The scheme took advantage of market swings following the Brexit vote to get a better deal for the bulk annuity which covers £750m of liabilities.
The fund benefited from having its interest rate risk well hedged, along with being largely invested in gilts which increased in value following the 23 June referendum, according to its adviser LCP. The transaction was signed eight working days after the vote.
The fund's ninth and second largest buy-in to date brings the total liabilities insured to £7bn out of total scheme liabilities of around £11bn.
Around 65% or £7.1bn of the scheme's liabilities has been insured so far and ICI has executed £5bn worth of buy-ins with L&G.
ICI Pension Fund chief executive officer Heath Mottram said: "The fund's strong governance and ability to move quickly was invaluable in taking advantage of this opportunity to further de-risk the fund."
Higher risk assets such as corporate bonds fell in value as many investors moved their money into safer assets such as gilts, which allowed these bonds and similar long-dated assets to be purchased at a cheaper price. An investment window of several weeks also opened up for the scheme to lock into these favourable market movements one week after Brexit.
LCP partner Clive Wellsteed said "We needed to move quickly in case this market opportunity closed, which was made possible by having innovative umbrella contracts in place with specifically designed to facilitate the fund to take advantage of sudden movements in the markets while maintaining the strong contractual terms and robust collateral structures already in place."
He said the fund had regular communications with L&G to consider a buy-in immediately after the EU referendum vote on 23 June.
L&G Retirement head of strategic pension risk transfer Cheryl Agius added: "The strength and depth of our relationship with ICI Pension Fund enabled us move fast when the market opportunity presented itself. The result is a further step forward in the de-risking programme which we are helping the ICI Pension Fund trustees to deliver for their scheme members."
Timeline - ICI buy-ins
- March 2014 - £3bn buy-in with L&G
- March 2014 £600m buy-in with Prudential
- November 2014 - £300m buy-in with Prudential
- March 2015 - £500m buy-in with L&G
- June 2015 - £500m buy-in with L&G
- June 2015 - £500m buy-in with Prudential
- March 2016 - £300m buy-in with L&G
- June 2016 - £630m buy-in with Scottish Widows
- July 2016 - £750m buy-in with L&G
Aviva Life & Pensions has concluded an £875m buy-in with its own staff pension scheme, following on from a similar transaction last year.
Nearly every trustee is confident of the next stage in their scheme’s strategy, despite almost an equal number being forced to consider replacing plans within the prior 12 months, according to research by Barnett Waddingham.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Just Group has completed a £74m pensioner buy-in with the UK pension scheme of a US-listed engineering business.
Defined benefit (DB) schemes that provide GMPs must revisit and, where necessary, top-up historic cash equivalent transfer values (CETVs) that have been calculated on an unequal basis, a landmark court judgment said last week.