(July 5, 2012) — The fastest ever pension fund buy-in has been completed in the United Kingdom as another of the industry’s key players has received a confidence boost in the form of newly committed capital.
The National Union of Mineworkers Permanent Employees’ Pension Fund has entered into a buy-in with MetLife Assurance in a deal that completed in just two weeks, the company has announced.
The fund and its advisors moved quickly to take advantage of historically low gilt yields. They said this made the deal to transfer around £27m of assets to insure pensioners’ guaranteed benefits “financially attractive”.
Timescales for such a deal – which includes significant due diligence and data cleansing – are usually measured in months or years rather than weeks, depending on the size of the fund.
Paul Jayson, partner at Barnett Waddingham, the firm that advised on the deal, said: “Our arrangement with MetLife meant that, having spotted an opportunity for an advantageous deal, liabilities could be secured quickly.”
Gilt yields have been forced to historic lows due to being seen as ‘safe haven’ investments compared to some in the neighbouring Eurozone. This has been compounded by the Bank of England’s Quantitative Easing programme, which has served to drive down government-backed bond yields.
“Even the shortest delay involved with the usual buy-in process could have led to this opportunity disappearing. The trustees are now in the fortunate position of having the bulk of their liabilities secured and can concentrate on managing the remainder of their assets to provide discretionary pension increases,” Jayson added.
Separately, Pension Corporation – one of the few remaining crop of pension risk insurers that were launched at the end of the last decade – announced it had secured up to £400 million in new capital from a Luxembourg-based specialist investment fund.
Under the terms of the deal Reinet has become a principal shareholder in the pension insurance business of Pension Corporation. The capital will be made available as required over the next five years, the insurer said.
Several new players to the sector at the end of the decade folded or were acquired by competitors due to their failure to secure adequate funding to write more business.