Bulk annuity provider Rothesay Life has insured the UK Lehman Brothers Pension Scheme after The Pensions Regulator (TPR) secured funding from subsidiary groups for the abandoned defined benefit (DB) scheme.

The £675m (€916m) deal, the largest in 2015, has seen the pension scheme transfer all risks to the insurer, with an end to restricted benefits after legal wrangling between TPR and the US bank’s administrators.

Rothesay is owned by US bank Goldman Sachs, Singaporean sovereign wealth fund GIC, asset manager Blackstone and Massachusetts Mutual Life Insurance.

Peter Gamester, chair of trustees for the scheme, said the deal secured full benefits for members – something the board had been working for since the bank’s insolvency in 2008.

A settlement between the pension scheme and Lehman Brothers International Europe (LBIE) funded the deal.

After the US bank collapsed in 2008, prompting administration for its international operations, the UK pension fund entered assessment for The Pension Protection Fund (PPF).

However, the £2bn scheme was left with a significant deficit, leading TPR – supported by trustees and the PPF –to launch legal challenges, demanding funding from subsidiary organisations undergoing administration.

In August last year, the case was finally settled.

The LBIE agreed to fund the scheme to secure a full insurance bulk annuity buyout, with members now also receiving back pay on restricted benefits, and the PPF avoiding the burden.

Gamester expressed his gratitude to the scheme’s advisers and LBIE for securing member benefits in full.

“Since the bankruptcy of Lehman Brothers in 2008, the trustees have been striving to secure the pension benefits promised to members of the scheme,” he said.

This is the first major public bulk annuity deal in 2015 after last year saw a record £12bn of pensions liabilities absorbed by insurers.

It is estimated there has been around £2.5bn of bulk annuity deals so far in 2015, with two buy-in deals worth more than £500m in addition to the Lehmans scheme.

This year has been noticeably quieter than 2014, which saw £4.3bn written in Q1 and £2.5bn in Q2 last year.

Legal & General (L&G) – which dominated the 2014 market, with a 45% market share – today announced £655m of new premiums for Q1 2015, £2.4bn down on last year after it took on £3bn from the ICI Pension Fund.

Rothesay wrote no business in Q1 on the build-up to the Lehmans deal but has now surpassed its performance for the first half of 2014 where it wrote only £556m.

It wrote a total of £1.7bn in 2014, as it struggled to keep pace with rivals L&G, Pension Insurance Corporation (PIC).

PIC is also seeing a quieter 2015, with expectations of new Q1 premiums around £100m compared with £148m in 2014, finishing the year on £2.5bn, some £1.2bn down on 2013.

Research from L&G showed nearly half of UK pension funds are set to use insurance products to underpin liabilities by 2020, as more than one-third of schemes aim for self-sufficiency using a buy-in contract.

Analysis by consultancy LCP showed that, if half of UK schemes insured half their liabilities by 2020, the bulk annuity market would require annual capacity of £25bn – double that seen in 2014.

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