International commercial bank Commerzbank AG has completed a full pensions buy-in transaction with the Pension Insurance Corporation (PIC), totalling £1.2 billion.
The policy has been completed to insure the pension liabilities of the Dresdner Kleinwort Pension Plan, which Commerzbank AG is responsible for following its acquisition of Dresdner Bank in December 2009.
Although insuring the entirety of the pension scheme, the buy-in policy has been divided into two transaction to cover plan's £900 million final salary section and a £300 million money purchase section.
Members within the money purchase section, who have hybrid defined contribution (DC) and defined benefit (DB) benefits, could choose to transfer their pension to an alternative arrangement or convert it into purely DB benefits. Any DB pensions have been insured under the terms of the buy-in.
Lane, Clark and Peacock (LCP) acted as lead adviser on the transaction and legal advice was provided by Linklaters.
David Curtis, chairman of the trustees at LawDeb Pension Trustees, said: “We are very pleased to have completed the insurance of both sections of the plan with the support of Commerzbank.
"This transaction required a high level of creative thinking by our advisers, LCP, in designing a structure combining the member choice programme with the insurance transaction. I want to thank PIC for their flexibility, especially in relation to the insurance of the money purchase section, which is an unusual transaction, and, I believe, a great result for the membership.”
David Salter, partner, de-risking practice at LCP, added: “We are pleased to have used our expertise to design a structure that [provides] members with flexibility and a high level of certainty over their options, [while] dovetailing with the insurance transaction to give trustees and Commerzbank cost certainty.”
Uzma Nazir, head of origination structuring at PIC, said: “Given the unusual hybrid DC and DB benefit structure, the trustees required flexibility from us to ensure that both sections of the plan were insured in line with their requirements. We are of course delighted to complete this, the biggest transaction of the year so far and one of the largest to date.
“Affordability of buy-ins and buy-outs has improved significantly in the past year and this is driving a record number of schemes and [organisations] seeking to insure in full.”
