Imperial Tobacco in £1.8bn buy-in with Standard Life

The £1.8bn buy-in for the scheme, sponsored by Imperial Brands, is the largest buy-in of 2021 to be announced so far, and the second largest bulk annuity following the £2.2bn buyout of the Metal Box scheme.

Around 60% of the circa £4.5bn scheme's pensioner members are now insured by this deal, which is the first bulk annuity for the scheme.

It forms part of around £5.5bn of deals that Standard Life, the bulk annuity business of Phoenix Group, completed in 2021 in a bumper year for the insurer that saw business more than double 2020.

It is also Standard Life's largest deal to date, having announced plans to, under its prior Phoenix name, make an "accretive" entry to the market in 2017.

Speaking to Professional Pensions this morning (13 January), Standard Life managing director of defined benefit (DB) solutions Justin Grainger said this was a "good sizeable transaction for us" as it targets trying to cover as much of the market as possible.

"It was a really busy end to last year and it's our biggest transaction to date by a little way. An interesting point about this deal was the trustee had some key objectives to fulfil in terms of the transaction and the contractual arrangements. We worked closely with them to meet their requirements and that's something that is a key part of our offering: to work very closely and to shape a proposition that works for both parties."

He added: "Because of the scale of the transaction, there's a lot of work that everyone needs to think about in terms of meeting the premium, managing the investment portfolio to ensure we deliver what both parties need."

The deal utilised a price lock to allow for data and contractual terms to be finalised while maintaining certainty for the premium.

Trustee chair Helen Clatworthy said: "This buy-in is a major step in the fund's de-risking strategy and significantly improves the security of members' benefits."

Lead advice to the transaction was provided by Hymans Robertson, whose "expertise was instrumental", Clatworthy said, while funding and investment advice was provided by Willis Towers Watson and Isio.

Legal advice was provided to the scheme by Osborne Clarke and CMS, while Eversheds Sutherland advised Standard Life.

Hymans Robertson partner Michael Abramson commented: "We are proud to have advised the trustee on this highly bespoke buy-in transaction. Through close collaboration between all parties, and Standard Life's willingness to innovate with us, a fantastic outcome has been achieved for the fund."

The deal forms part of £5.5bn of transactions completed by Standard Life last year, more than double the volume recorded in 2020. Its deals this year include a £230m buy-in with an Agfa pension scheme and a £130m with a PerkinElmer scheme, completed amid a market that has so far confirmed £20.7bn of buy-ins and buyouts.

Grainger said he anticipated total market activity of between £30bn and £50bn this year - an estimate made by Lane Clark and Peacock - with the insurer already facing a pipeline "approaching double digs in terms of billions of pounds that we're working on live".

"There's a substantial number of transactions that we haven't got the full details of yet," he continued. "It was an interesting year last year; a game of two halves. I fully expect this year to be a bit more normalised in terms of seasonality and how the market used to behave."

2021 saw just £7.9bn of bulk annuities agreed in the first half, but announced deals for July to December already amount to £12.9bn with final figures yet to be confirmed.