A £675m funding deal for the defined benefit pension scheme of Lehman Brothers’ European arm has been completed after administrators from PwC struck an agreement to transfer the risk of the scheme to insurer Rothesay Life.
PwC, as administrators for the collapsed bank, led the transaction – the largest bulk annuity deal written this year – which ensures that all members will get their pensions in full, six and a half years after Lehman collapsed. The deal comes ten months after those running the scheme reached a £184m settlement with administrators of the failed bank.
The payments will be made via the scheme initially, with Rothesay Life taking over responsibility for paying benefits to members directly when the bulk annuity converts to a full buy-out, PwC said.
Since the insolvency of Lehman Brothers in 2008, the scheme has been subject to an “assessment period” under the Pensions Act 2004. As a result, the benefits payable to current pensioners have had to be restricted. When the assessment period ends in July 2015, these restrictions will be lifted and benefits will be paid in full (including back-payments).
Paul Kitson, partner and risk transaction team leader at PwC, said the firm used analytics software to complete the deal at “competitive pricing”.
“We are delighted to have advised LBIE in securing members’ benefits in full for this landmark transaction. Certainty of cost was an important objective,” Kitson said. “This real-time analysis was also the basis for a very successful asset hedging strategy meaning that the deal stayed firmly on track during a period when falls in interest rates impacted buy-out affordability for most UK pension schemes.”