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The Actuary The magazine of the Institute & Faculty of Actuaries

MNOPF secures members’ benefits with Lucida

The Trustee of the Merchant Navy Officers Pension Fund (MNOPF) has secured around £500 million of pension liabilities through a bulk annuity contract purchased from Lucida plc, the insurance company focused on annuity and longevity risk business. The agreement sees Lucida insuring over half of the total pensioner benefits of the Old Section – a section of the fund which closed in 1978 and covers almost 22,000 retired members.

Andrew Waring, chief executive of MNOPF, said: “Security has been the Trustee’s watchword in deciding to de-risk, in selecting a provider and in negotiating the contract. This insurance policy takes a significant step along that path and is an important contribution to our wider strategy of progressively reducing risks across the Fund.” Watson Wyatt project leader and senior consultant, Paul Kitson, said “Annuities and similar solutions are the ultimate matching asset for pension schemes and protect them from market movements and increasing life expectancy. Multi-billion pound pension funds like MNOPF are looking to de-risk in stages but [still” take advantage of opportunities as they arise.”

The de-risking and selection process was led by MNOPF’s long-term actuarial and investment advisors Watson Wyatt and legal advisors Baker & McKenzie. This bulk annuity policy is a ‘buy-in’ rather than a ‘buyout’. This involves Lucida insuring the longevity and asset risks of a proportion of the Old Section of the MNOPF. The insurance policy becomes a new asset class within the pension scheme, overseen by the MNOPF Trustee alongside the other scheme assets. This means that individuals remain entitled to benefits from the scheme rather than from Lucida and will receive their benefits in exactly the same way as now.