British Airways (BA) pension trustees have signed a buy-in deal with Rothesay Life for one of the airline’s defined benefit (DB) schemes.
The life insurer, a subsidiary of Goldman Sachs, will insure £1.3 billion of pension liabilities of the Airways Pension Scheme.
The transaction is a buy-in deal under which trustees will retain ownership of the assets backing the transaction. In return for the proceeds for these assets, Rothesay Life pays the agreed portion of pensioner benefits to the trustees. The policy will provide cover for 20% of the pension payments due to scheme members.
BA’s two DB schemes have a £3.7 billion deficit, the majority of which is in its other plan the New Airways Pension Scheme.
Paul Spencer, chairman of the trustees of the Airways Pension Scheme, said: “The insurance policy entered into with Rothesay Life will provide protection against the cost of pensioners living longer as well as providing a better match for expected pension cashflows.
“The trustees, working with their appointed advisers conducted a thorough market review process and selected Rothesay Life to deliver a bespoke solution to the scheme.
“Our selection was based on the insurer’s creativity and structuring abilities, the robustness of the security package underlying the insurance contract and the execution certainty, which gave us the ability to deliver this solution at a pre-agreed price level.”
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