Marks and Spencer has completed a £1.4bn buy-in with Aviva and Phoenix Life, covering around a third of its scheme’s pensioner liabilities.

The buy-ins have enabled the M&S scheme to match benefit cash flows and remove longevity risk for a portion of its pensioner population. The pricing of the deal was achieved as a result of thorough preparation of the trustee and the simultaneous engagement of both buy-in providers and longevity reinsurers.

The £1.4bn deal comprised of a £470m bulk purchase annuity with Pheonix Life and £925m bulk purchase annuity with Aviva, the insurer’s largest bulk annuity deal to date. The deal is Phoenix Group’s first external BPA transaction less than a year after it entered the market and was advised by CMS.

LCP advised the trustee on the transactions and Linklaters provided legal advice to the trustee.

The deals with both insurers were under umbrella master agreements and transaction schedule, which allows the trustee to complete further buy-ins with either of the two insurers or other market participants in future.

M&S’s deal signifies the retailer’s continued effort to reduce the risks in its £10bn DB pension scheme, following the closure of the scheme in 2017.

Members will not see any change in their benefits or the way they are paid, it has been confirmed.

Commenting on the transaction, M&S chairman of the Marks and Spencer Pension Trusts Graham Oakley said: “The Scheme’s strong funding position has allowed the trustee to follow a strategy of reducing risk by aligning investments more closely with the pension benefits we will need to pay to members. This bulk purchase annuity is a significant step in reducing longevity risk being managed by the Trustee, providing additional security for all members’ benefits.”

Aviva managing director of DB solutions Tom Ground added: We’re delighted that the Marks and Spencer Pension Scheme has chosen us to insure a proportion of the pension benefits of its members. Not only does this latest deal build on the great relationship we already have with Marks and Spencer but as our largest bulk annuity deal to date, it also perfectly demonstrates our increased appetite for bigger deals.”

Phoenix Group head of BPA Justin Grainger also noted: “We are delighted to have been selected by the Trustee of the Marks and Spencer Pension Scheme for our first BPA transaction. We look forward to building our relationship further with Marks and Spencer and helping protect the security of their members’ benefits. This is a growing marketplace and, as this transaction demonstrates, we are well-placed to offer attractive solutions to other defined benefit pension schemes.”

Hymans Robertson also advised Marks and Spencer on the deal. M&S group treasurer Joanna Hawkes said: “Hymans Robertson has advised us over a number of years supporting the journey to a very strong position. Their collaborative and pragmatic approach in advising us on this buy-in has ensured that we were able to get all stakeholders aligned on the successful execution of this transaction.”

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