The Merchant Navy Officers Pension Fund (MNOPF), worth approximately £3 billion, has reached a £1.6 billion buy-in agreement with Pension Insurance Corporation (PIC).
The buy-in, announced today (10 February 2020), covers members affected by fund’s longevity swap, which was completed in 2014, was structured as an insurance agreement between the trustee and MNOPF, and a reinsurance agreement between MNOPF and Pacific Re Life.
For the conversion of this longevity swap to buy-in, law firm CMS provided legal advice to PIC, while Pacific Life Re was advised by Hogan Lovells.
Rory Murphy, chairman at MNOPF said: “This buy-in enables us to more effectively manage the risks faced by the fund as a whole, providing greater certainty to members that their benefits will continue to be paid in full from the fund. It is also good news for employers in the maritime and shipping industry, [which] have already saved many millions in deficit contributions over recent years as a result of our improved funding position.
“There is also a positive message here for the wider pensions community. A well-run fund, with strong governance and expert advisers, can deliver valued and sustainable benefits to its members while successfully managing the risks and costs faced by its employers.”
Uzma Nazir, head of origination structuring at PIC, added: “We are delighted that the MNOPF Trustee chose to work with PIC and ultimately secure this tranche of their members’ benefits with us. It takes expertise to complete conversion of a longevity swap to buy-in and all parties worked well together to get the trustee’s desired goal. A great outcome for all.”
Andy Waring, chief executive officer at MNOPF, said: “Securing the benefits of our members has always been a significant part of the MNOPF journey plan. The buy-in with PIC is a great step forward to achieving this outcome. The trustee pioneered the use of a ‘ready-made’ Guernsey captive cell for the purposes of longevity hedging back in 2014; one of the reasons for this was our view that it would make a future novation to buy-in easier and more efficient, which has proved to be the case”