By Susanna Rust2021-01-26T15:34:00+00:00
Legal & General has agreed an assured payment policy (APP) transaction for around £400m (€451m) with the Legal & General Group UK Senior Pension Scheme.
The deal provides investment risk protection for the pensions of around 200 deferred members and 385 pensioner members.
In exchange for an upfront premium, APPs provide pension schemes with a pre-agreed series of cashflows, selectively insuring against investment-related risks such as changes in asset yields, interest rates and inflation. Longevity and wider demographic risk protection can be added subsequently through conversion to a bulk annuity, but are not covered by an APP.
“At the simplest level an APP does the reverse of a longevity insurance contract,” said Frankie Borrell, head of client solutions at Legal & General Retirement Institutional. “It isolates and tackles investment risk and inflation risk, passing that to the insurer whereas the longevity and demographic risk stays with the pension scheme.”