British American Tobacco UK Pension Fund agrees third and final buy-in

Written by Adam Cadle

09/02/2023

The trustees of the British American Tobacco UK Pension Fund have agreed a third and final buy-in with the Pension Insurance Corporation (PIC), covering the remainder of its uninsured liabilities.

According to British American Tobacco’s annual results, the buy-in is intended to match a specific part of the scheme's future cash flows arising from the accrued pension liabilities of retired and deferred members, as well as improving the security of the scheme and its members.

As part of the buy-in, £198m of assets were transferred immediately, while £35m of the premium deferred until 2023 and 2024, with the subsequent fair value of the insurance policy matching the present value of the liabilities being insured.

This is the third buy-in for the scheme, after trustees previously agreed a £3.4bn buy-in with PIC in May 2019, and a further £400m buy-in with PIC in July 2021.

As a result of these transactions, approximately 94% of the assets held by the pension scheme, up from 84% in 2021, are represented by the buy-in contracts, covering 100% of the scheme's retirement liabilities.

The UK scheme buy-in was announced alongside a partial buyout for the group’s US scheme, the Reynolds American Retirement Plan, with approximately £1.3bn of plan liabilities removed from the balance sheet as a result, resulting in a settlement gain of £16m.

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