The National Grid UK Pension Scheme has concluded a £2.8bn buy-in transaction with Rothesay Life covering just over 8,000 members.

The buy-in relates to Section A of the scheme, which is the part that is sponsored by commercial businesses which are not regulated by Ofgem.

The sections are all ring-fenced from the others with completely separate assets and liabilities. Each section has its own assets, financial support and security arrangements, but the trustee board is responsible for the whole scheme.

In total, the plan is responsible for around £20bn of assets under management. It has around 100,000 members, mostly from the gas transmission and distribution businesses, and is closed to new members.

The ‘buy-in’ transaction with Rothesay Life involved the purchase of a bulk annuity, funded by £2.8bn of the UK fixed interest securities.

Under the agreement, Rothesay Life has committed to reimbursing the trustee for all the pension benefits payable to those Section A pensioners of age 70 or less (including to their spouses) until the death of the last pension beneficiary.

The scheme formally approached the market in April and the transaction completed in mid-August. The transaction was complex, but the size of total scheme meant that there was a large amount of mortality experience data available.

National Grid UK Pension Scheme chairman and trustee, Nigel Stapleton, said: “The buy-in provides greater certainty and assurance about the future costs of providing members’ pensions, and we see this as a positive and prudent way of managing the overall funding and risk of the scheme.”

Rothesay Life business development, Sammy Cooper-Smith, added: “This was a large and complex transaction; our sophisticated risk management systems allowed us to provide economic certainty to the trustees ahead of transacting despite volatile market conditions in recent weeks.”

The trustees were advised by Aon, Sackers provided legal advice and actuarial support was provided by Willis Towers Watson. Rothesay Life were advised by Allen & Overy.

Aon partner, Mike Edwards, added: “This transaction was a great example of how putting in place a robust process for Trustee decision-making which acknowledges the need for flexibility in the current market can enable schemes to capture the best transaction opportunities.”

Last month, Rothesay Life agreed the UK’s largest ever bulk annuity deal to date – a £4.7bn buyout of the GEC 1972 Plan.

The transaction insured benefits for 39,000 members, split roughly between 70 per cent pensioner members and 30 per cent deferred members.

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