M&G has marked its return to the bulk purchase annuity (BPA) market with two buy-in transactions totalling £617m.

It has concluded a £331m buy-in transaction for one of its own pension schemes, the M&G Group Pension Scheme (M&GGPS), and a £286m bulk annuity deal for an unnamed external scheme.

M&G said it planned to announce the details of the transaction with the external scheme next week.

The insuring entity for the deals was M&G’s wholly owned subsidiary: The Prudential Assurance Company (PAC).

M&G was reformed from the de-merger of M&GPrudential in 2019, with the UK insurance business becoming part of M&G. The UK insurance business was active in the UK bulk annuity market between 1997 and 2016 under the brand Prudential.

These new deals mark the first time that M&G has completed bulk annuity transactions under the brand M&G.

It has re-entered the market with two buy-ins at a time of high demand for bulk annuity deals amid improved defined benefit (DB) scheme funding levels.

The whole scheme buy-in for the M&GGPS secured the benefits of 1,414 pensioner and deferred members.

Active members were able to choose between either continuing with DB accrual in a different M&G pension scheme, or becoming part of the bulk purchase deal and joining a defined contribution arrangement.

The timing of the buy-in was “closely aligned” with the scheme transfer, with the aim of securing the best outcome for members.

M&G worked with the trustee and its advisers to enable a transfer of the pension scheme’s illiquid assets to PAC as part of the transaction.

“We are pleased to have achieved this significant step that will provide greater security for members’ benefits,” commented M&GGPS chair of trustee, Mark Thompson.

“The collaborative approach between the trustee, M&G and our advisers has meant that we have been able to insure our members’ benefits sooner than we expected and so this is a very positive outcome.”

M&G group chief executive, Andrea Rossi, added: “I am delighted that we have been able to create bespoke solutions to meet the needs of these two schemes.

“Combining our deep expertise in asset management and insurance capabilities was key for these transactions.”

Hymans Robertson acted as investment adviser to the trustee, while Mayer Brown International provided the trustee with legal advice and Eversheds Sutherland acted as the legal adviser to M&G.

Aon provided advice to the trustee on the deal as risk settlement adviser and scheme actuary, with Aon partner, Mike Edwards, stating: “Structuring this transaction required us to leverage our deep experience from both the advisory and insurer side and we are pleased to have brought all of this to bear for the trustee.

"This transaction involved working closely with M&G to develop a bespoke solution for active members. As more schemes approach full funding we expect continued innovation in this area to enable positive outcomes for all stakeholders.

"M&G’s entry to the UK bulk annuity market will provide additional capacity and competition and this is most definitely welcome with demand from pension schemes for bulk annuities at an all-time high.

"We are aware of a number of other prospective new insurer entrants looking at the market and, whilst the lead in time for this can be lengthy, we might reasonably expect others to start quoting on transactions over 2024.”

Commenting on M&G’s re-entry into the BPA market, LCP partner, Charlie Finch, said:

“We predicted at the start of the year that we would see an additional insurer enter the bulk annuity market this year.

“This transaction today marks M&G’s re-entry to the market after a near seven-year absence, and represents their first transaction as M&G (prior to 2016 they wrote transactions under the Prudential brand).

“It will be welcome news for many pension schemes as the additional capacity M&G brings will help ease the building pressure as a record volume of schemes seek quotations from insurers.

“Scheme funding levels have continued to improve this year due to further rises in long-term interest rates and continued attractive pricing from insurers.

“We are in discussions with a number of other insurers that are planning to enter the market over the next year, seeking to tap into the market’s growing potential.”

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