The British Airways sponsored Airways Pension Scheme (APS) has completed a £4.4bn pensioner bulk annuity buy-in with Legal & General.
The deal - the largest pensioner buy-in ever completed in the UK market - will cover around 60% of the scheme's pensioner liabilities.
The transaction accounts for existing longevity reinsurance contracts of circa £1.7bn that APS entered into via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement.
Following the completion of the £4.4bn buy-in transaction announced today and allowing for previous pensions insurance transactions, APS is now 90% hedged against all longevity risk.
The APS trustee worked with PwC as lead transaction advisors to identify and secure an attractive buy-in pricing opportunity. Allen & Overy, Eversheds Sutherland and Willis Towers Watson advised the trustee throughout the process. Legal & General were advised by Clifford Chance.
APS chair of trustees Virginia Holmes said: "This transaction is the latest in a number of insured arrangements entered into by the Airways Pension Scheme. It demonstrates the vision and determination of the trustee to reduce risk and increase security for members. Today's announcement is the culmination of much hard work undertaken over several months and we are pleased to be taking this significant step in the Scheme's de-risking journey."
PwC pensions director Ben Stone added: "Completing a deal of this size in the busiest ever year for pension buy-ins shows that the market is working well.
"High demand from pension schemes puts pressure on insurer assets and manpower but those schemes with well-planned approaches to market continue to access positive de-risking insurance opportunities."
Willis Towers Watson scheme actuary Michael Pardoe said: "This buy-in is the culmination of many initiatives that we have helped the Trustee identify, which together greatly reduce risk and increase the security of members' benefits in APS."
Legal & General Retirement Institutional chief executive Laura Mason said the firm was "proud" to have won a deal of this size.
She said: "This is a great example of Legal & General delivering for UK companies and their pension members, enabling pension schemes to provide security to their pensioners in retirement."
L&G chief executive Nigel Wilson added he expected the second half of 2018 to be a record six months for L&G's pension risk transfer business - adding the firm expected to announce further transactions over the coming months.
He said: "We are actively quoting on £27bn of UK PRT deals demonstrating the strong demand for insurance, supported by increasing affordability, as trustees seek to improve security for members and companies look to remove legacy liabilities."
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.