The first bulk purchase annuity to give the employer potential investment returns while at the
same time securing members’ benefits has been launched by M&G with a corporate client.
The first ever hybrid Value Share Bulk Purchase Annuity (BPA) deal has just been
completed with a £500m transaction by a private corporate sponsor and its UK pension
scheme, insuring around 3,200 pensioner and deferred members.
The Value Share BPA proposition is an alternative to a traditional buy-in arrangement,
allowing trustees to insure the scheme members in the same way as a traditional buy-in
transaction, while also allowing corporate sponsors to participate in the risk and reward
generated from insuring their UK pension schemes. It offers employers with well-funded DB
pension schemes the ability to secure members’ benefits while potentially returning capital to
the corporate entity, by letting the scheme’s investments continue to grow rather than
securing a one-and-for-all buyout annuity.
M&G re-entered the bulk annuity market in September 2023 and has since written £1.4bn of
new business. It was a founding member of the BPA industry with an existing annuity book
of £15bn with over 400 transactions completed between 1997 and 2016.
Clive Bolton, life insurance CEO at M&G plc, said: “This ground-breaking value share BPA
transaction provides approximately 3,200 pension scheme members with the ultimate security
of a buy-in, while sharing the financial risk and upside with the corporate sponsor. This
significant de-risking milestone has been made possible thanks to the strong alignment of
interests, collaboration and commitment between all parties involved.
“By completing the first ever BPA transaction that shares value with the sponsor, we are
showcasing our ability to create innovative solutions that address our clients’ requirements.
This has the potential to transform the market by providing an alternative option for sponsors
of large UK pension schemes to consider as part of their de-risking endgame. We look
forward to working with clients and advisers as we tailor this solution to meet the needs of
corporate sponsors whilst securing the future pensions for the scheme members.”
Alison Fleming, partner at PwC, said: “We are thrilled to have supported the sponsor as lead
adviser on this transaction, including both the buy-in and the structuring, set up and
commercials for the captive reinsurer. Implementation of this ‘first of its kind’ structure is the
culmination of our work with the Sponsor on pensions over a number of years. The solution
we have achieved ultimately enables the trustee to achieve their derisking objectives and
secure members’ benefits, whilst enabling the sponsor to access risks and rewards that would
be passed to an insurer in a more traditional transaction.”
Deborah McWhinney, risk transfer principal at Mercer, said: “The Value Share BPA transaction
represents an impressive outcome for the trustee board and reflects their dedication in
achieving their de-risking objective for their members.”
