The UK’s United Utilities has completed a £1.8bn buy-in deal with Legal & General (L&G) for its two pension schemes – the United Utilities Pension Scheme and the United Utilities PLC Group of the Electricity Supply Pension Scheme.
The deal will cover around two thirds of the two schemes’ liabilities, it was announced.
The United Utilities pension schemes are existing clients of L&G with Legal & General Investment Management (LGIM) managing a portion of the schemes’ assets since 1998.
Gary Dixon, chair of United Utilities’ trustee boards, said the transaction across the two pension schemes provided security for all its members and saw it as “taking a further step on our de-risking journey”.
Aon, Mercer and Sackers advised the trustees.
“As a result of a clear strategy, a collaborative approach and meticulous planning, the trustees and company have achieved their highly bespoke transaction objectives,” said John Baines, a partner in Aon’s risk settlement group.
L&G provided a bespoke price lock to the assets held by the schemes, including the assets held with LGIM, the announcement revealed. This removed the risk for the trustees of the buy-in price changing relative to the value of the schemes’ assets while the transactions were agreed.
Andrew Kail, chief executive officer at Legal & General Retirement Institutional, told IPE that L&G is now on track for one of its busiest years yet, “having now written £6.7bn of pension risk transfer business in the UK year-to-date”.
Today’s transaction follows a previous buy-in deal between the British Steel Pension Scheme and L&G a couple of months ago.
This year, L&G transacted on £6.8bn of pension risk transfers, with £5bn completed by the half of the year. There has been an increase in the number of pension schemes approaching the insurance market, alongside an increase in £1bn transactions, with several more such pension schemes intending to complete transactions, according to L&G.