The buy-in transaction was completed with insurers Aviva and Phoenix Life using an umbrella master agreement. It has been designed to reduce longevity risk for a proportion of the pension scheme’s retired members, and to correspond with Marks and Spencer’s investment strategy, which aligns pension investments with the required benefits needed to pay members.
The buy-in policies, which cover approximately a third of the DB scheme’s pensioner liabilities, additionally ensure that pension members’ benefits are secured, while shareholder risk is minimised.
Marks and Spencer’s DB pension scheme, which is worth £10 billion, was closed to future accrual in 2017.
Lane, Clark and Peacock (LCP) advised the trustee on the buy-in transaction, Hymans Robertson advised Marks and Spencer and Linklaters provided legal advice.
Simon Lee, chief information officer of the Marks and Spencer pension scheme, said: “We are delighted to have secured these insurance policies for a significant portion of the benefits payable to our members. We were able to do so at attractive pricing and on favourable terms through significant competitive tension and a process led by LCP and Linklaters and supported by the scheme actuary and investment advisers, Willis Towers Watson, that has now positioned the [Marks and Spencer] pension scheme to execute efficiently with these and other insurers in the future.”
Graham Oakley, chairman at the Marks and Spencer Pension Trust, added: “The scheme’s strong funding position has allowed the trustee to follow a strategy of reducing risk by aligning investments more closely with the pension benefits we will need to pay members. This bulk purchase annuity is a significant step in reducing longevity risk being managed by the trustee, providing additional security for all members’ benefits.”