The group pension plan for private equity manager 3i has struck its final buy-in, a £650m (€716m) deal with Legal & General Assurance Society, it was announced today.

The transaction is thought to be the largest UK pension risk transfer transaction announced this year.

It covers the benefits of around 280 pensioners and 570 deferred members and, according to a statement from Legal & General, means the plan is now fully insured through buy-in policies held as assets of the plan.

The trustees previously completed two pensioner buy-ins, one in 2017 with the Pension Insurance Corporation and one last year with Legal & General.

According to the statement, 3i group is fully supportive of the latest buy-in, although it was achieved without relying on it for any additional contribution.

Carol Woodley, chair of the 3i Group Pension Plan trustees, said: “This transaction is a significant step forward in providing a more certain and secure solution for members’ future benefits and removes significant risks in the plan that would otherwise be difficult to hedge.

“Achieving this level of security is especially valuable in the current economic climate and we are delighted that, with the support of our advisers, we have been able to take this step sooner than previously anticipated.”

Laura Mason, CEO Legal & General Retirement Institutional, said: “We are delighted to have continued our partnership with the 3i Group Pension Plan and help complete the final step of its de-risking journey, providing a solution that ensures the long-term benefits promised to its members are fully secured.”

The trustees were advised by LCP, Linklaters and Lincoln Pensions. 3i Group was advised by Mercer and Slaughter and May, and legal advice was provided to Legal & General by Macfarlanes.

Legal & General noted that its asset manager has provided investment support to the 3i pension plan since 2004.

Market movements triggered by the coronavirus crisis have made for attractive pricing opportunities in the bulk annuity market. 

PLSA opens forum to progress pensions climate risk agenda 

The Pensions and Lifetime Savings Association (PLSA) will be hosting a series of online roundtables from 12 June to give pension schemes a structured forum to discuss “ideas, solutions, and barriers to the pension industry operating in ways which have a positive impact in helping the UK achieve its Paris climate agreeement commitments”, it said today.

In addition, it is inviting pension schemes, the wider financial services industry, the public and any other stakeholders to share their views on the practical ways the retirement savings sector can address climate risk.

It is seeking responses to the followinq questions:

  • How are pension funds currently incorporating climate considerations into their investment approaches?
  • What are the biggest practical challenges to effective consideration and implementation of climate-aware investment strategies?
  • To what extent will existing industry, policy or regulatory initiatives be effective in overcoming these challenges?
  • Are there any industry, policy or regulatory initiatives which would support you in consideration of climate risks and opportunities?

Richard Butcher, PLSA

Richard Butcher, chair of the PLSA

The PLSA has made climate risk one of its top policy priorities for 2020. It considers that ”a significant amount of good work has been undertaken by both policymakers and the investment industry to achieve greater decarbonisation [but] there remains room for improvement”.

Its view is that tackling climate change and ensuring the ongoing stability of the financial system requires all segments of the investment chain to “work in alignment”. 

It is working on finding workable solutions to the remaining barriers to green finance, and providing practical support for actors across the investment chain.

Richard Butcher, chair of the PLSA, said: “The PLSA is rightly proud of its efforts to encourage the pension industry to prioritise climate risk to date.

“With the engagement this work has brought, and new climate regulations in force, I am excited to be getting the opportunity to discuss with scheme CEOs, CIOs, trustees and anybody else to turn enthusiasm into action and take the agenda further.”

Q1 hurts 2019’s best performing fiduciary managers hardest

The outbreak of the coronavirus drove a 10% differential between the best and worst performing fiduciary managers in the UK in the first quarter of 2020, according to XPS Pension Group.

The consultancy analysed the performance of fiduciary managers in the first quarter for a special edition of its regular ‘FM Watch’ report, and found that those managers that made the strongest gains through high equity allocations in 2019 also sustained the biggest losses in 2020, while managers that made lower returns in 2019 tended to be better prepared for the market falls.

Three-quarters of fund managers made changes to their portfolio in early 2020, to take advantage of emerging opportunities and to defend against losses. 

Towards the end of March and early April, there was a divergence of views on economic outlook, XPS said, with some managers looking to increase exposure to equities and others acting more defensively and increasing allocations to government bonds or cash.

“The market downturn was the first big challenge for the majority of fiduciary managers”

André Kerr, head of fiduciary oversight at XPS Pensions Group

“The market downturn was the first big challenge for the majority of fiduciary managers,” said André Kerr, head of fiduciary oversight at XPS Pensions Group.

“The industry was only in its infancy during the 2008 financial crisis and since then managers have enjoyed one of the strongest bull markets in history. While all managers suffered losses last quarter, these were most severe for bulls in the bull market.

“As the initial shock of Covid-19’s arrival begins to subside, trustees at pension funds with an outsourced fiduciary management must understand what is driving strategic decisions and whether they align with their investment beliefs.”

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