British American Tobacco strikes £3.4bn buy-in deal
On the go: British American Tobacco's UK pension scheme has agreed a buy-in covering both pensioners and deferred members, the third largest struck to date.
Totalling £3.4bn and transferred to the Pension Insurance Corporation, the deal is the largest to include non-pensioner members and comes as FTSE 100 companies' derisking drive accelerates.
Alongside BAT, so far this year Marks & Spencer, 3i, Pearson and Rolls-Royce have all completed bulk annuity deals.
The tobacco scheme deal will cover 8,300 pensioners and 2,300 non-pensioners, and insulates most of the scheme from further risk. Total liabilities in the scheme are £4bn, and include a section still open to future accrual.
Brian Barrow, Chairman of the British American Tobacco UK Pension Fund, said: “This transaction is very good news for our members, insuring the vast majority of benefits within the fund. It achieves a significant step towards the trustee’s objective of reducing risk and increasing the security of members’ benefits. We are delighted that we have been able to complete a transaction of this scale successfully, despite the recent market volatility."
PIC's head of business development Mitul Magudia said the mix of pensioner and deferred liabilities introduces complexity in areas such as asset strategy and reinsurance, but that the "experienced advisers, a highly knowledgeable trustee board and a wealth of experience" had helped steer the project home.
LCP advised the trustee on the deal, while Mercer helped with the overall derisking strategy. Linklaters was legal adviser to the trustee, while PIC was advised by Herbert Smith Freehills.