Global asset manager M&G has returned to the UK’s bulk purchase annuity (BPA) market by concluding a £331m buy-in transaction for one of its own pension funds – M&G Group Pension Scheme – as well as a £286m bulk annuity transaction for an external scheme, whose identity will be revealed by M&G next week.

The insuring entity is The Prudential Assurance Company Limited (PAC), M&G’s wholly-owned subsidiary offering life and pensions solutions, it was announced.

The whole scheme buy-in for the M&G pension fund secures the benefits of 1,414 pensioners and deferred members.

Active members were given the choice of either continuing with defined benefit (DB) accrual in a different M&G group pension scheme or becoming part of the bulk purchase transaction and joining a defined contribution (DC) 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 also worked with the trustees and its advisers to enable a transfer of the pension scheme’s illiquid assets to Prudential as part of the transaction, M&G stated.

The trustees were advised on the transaction by Aon as risk settlement adviser and scheme actuary, Hymans Robertson as investment adviser, and Mayer Brown International as legal adviser. Eversheds-Sutherland provided legal advice to M&G.

Andrea Rossi, M&G’s group chief executive officer, said: “Combining our deep expertise in asset management and insurance capabilities was key for these transactions.”

Mark Thompson, chair of trustees at the M&G scheme, noted: “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 at Aon, said: “This transaction involved a high degree of complexity and required careful collaboration across many stakeholders.”

Mike Edwards, partner at Aon, added: ”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.”

Historical background

M&G Prudential – an asset manager created in 2017 as part of a major reorganisation of Prudential’s UK businesses – was formally separated from the rest of the company by the end of 2019.

The company was an active player in the BPA market from 1997 to 2016. But as part of the restructuring, M&G Prudential’s last bulk annuity transaction was written in 2015, with subsequent exit from the market in 2016.

At the time the company stated its decision to exit was partially driven by corporate priorities and partially by the introduction of the Solvency II capital rules, an M&G spokesperson told IPE.

M&G’s strong performance since the de-merger, diversified profits and strong capital position allow PAC – M&G’s insuring entity – to selectively participate in the bulk annuity market again, “where we believe we can deliver value to customers and shareholders”, the spokesperson said.

She noted that M&G’s Corporate Risk & Investment Solutions business was founded in 2021 and was set up to develop and deliver de-risking propositions for UK DB pension schemes more widely, including bulk annuities. The newly-formed ‘new business’ team sits within this team, as does the core client services team, she added.

“There is large opportunity in this segment of the market at the moment. A combination of rising interest rates and the LDI crisis in September 2022 has dramatically improved the funding levels of schemes and hugely accelerated their de-risking journey. Today have today announced our first two transactions since 2015,” the spokesperson said.

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