The Trustee of the c.£3 billion Merchant Navy Officers Pension Fund (“MNOPF”) has secured c.£1.6 billion of members’ pension benefits through a buy-in transaction with Pension Insurance Corporation plc (“PIC”).
This buy-in being is in respect of the members covered by the Fund’s longevity swap that was completed in 2014. The 2014 longevity swap was structured as an insurance agreement between the Trustee and MNOPF IC Limited, a new and specially established Guernsey cell company, and a reinsurance agreement between MNOPF IC Ltd and Pacific Life Re. The longevity reinsurance is being novated to PIC as part of the buy-in transaction.
MNOPF Chair, Rory Murphy, said: “This buy-in enables us to more effectively manage the risks faced by the Fund as a whole, providing greater certainty to members that their benefits will continue to be paid in full from the Fund. It is also good news for employers in the maritime and shipping industry, who have already saved many millions in deficit contributions over recent years as a result of our improved funding position.
“There is also a positive message here for the wider pensions community. A well-run fund, with strong governance and expert advisors, can deliver valued and sustainable benefits to its members while successfully managing the risks and costs faced by its employers.”
Uzma Nazir, Head of Origination Structuring at PIC said: “We are delighted that the MNOPF Trustee chose to work with PIC and ultimately secure this tranche of their members’ benefits with us. It takes expertise to complete a conversion of a longevity swap to a buy-in and all parties worked well together to get the Trustee’s desired goal. A great outcome for all.”
Andy Waring, CEO of the MNOPF, said: “Securing the benefits of our members has always been a significant part of the MNOPF Journey Plan. The buy-in with PIC is a great step forward to achieving this outcome. The Trustee pioneered the use of a ‘ready-made’ Guernsey captive cell for the purposes of longevity hedging back in 2014 – one of the reasons for this was our view that it would make a future novation to buy-in easier and more efficient, which has proved to be the case”.
Shelly Beard, Senior Director and deal lead from Willis Towers Watson said: “Having led the MNOPF’s 2014 longevity swap, it was great to ‘finish the job’ and novate this to an annuity. The existing longevity swap fed through to attractive pricing from PIC and the novation process was straightforward, taking less than two months. It was a pleasure working with Pacific Life Re on the novation, who provided practical solutions to ensure a smooth transfer of the longevity swap.”
Jeanette Holland, Head of Pensions and legal lead from Baker McKenzie said: “We are delighted to have assisted the MNOPF once more in taking another important and innovative step in achieving its derisking objectives. It has been an interesting transaction from a legal perspective drawing on a number of legal disciplines.”