UK - Trustees of the £2bn (€2.2bn) Cadbury Pension Fund have agreed a buy-in for around £500m of their pensioner liabilities with Pension Insurance Corporation (PIC).
This matches the largest buy-in deal earlier this year - following the Merchant Navy Officers' Pension Fund buy-in with Lucida - as the trustees have purchased an insurance policy covering around 10,000 pensioners that will be held as an asset by the scheme. (See earlier IPE article: MNOPF completes £500m buy-in with Lucida)
Aon Consulting, which placed the pension fund's tranche of members via an insurance plan, noted the decision to complete the buy-in is part of the scheme's ongoing programme of reducing risk. The insurance contract will protect the fund from investment risk, inflation risk and longevity risk for the pensioners covered.
Completion of this deal comes as Cadbury, the scheme's sponsoring employer, has been battling to reject a takeover offer by rival food company Kraft. However, this deal is in no way related to the takeover bid.
John Coomber, chief executive of PIC, said: "We have been working with the trustees for over a year in order to meet their requirements with the most appropriate transaction for the fund. We are very pleased to have been able to help the trustees achieve this important step in securing pensioner benefits."
The bulk annuity market has been affected by the volatility in markets over the last year, which in turn has impacted pricing, so recent full buyouts have been of a moderate size. However, the Cadbury's deal and the earlier MNOPF buy-in suggest the buy-in route is becoming more popular with companies.
Lane, Clark & Peacock (LCP) claimed the Cadbury's deal brings the total volume of pension buyouts and buy-ins to £3.4bn for the year to date. And of these PIC has written £1bn of business, while an additional £3.2bn of longevity swaps have been written including yesterdays announcement of a £750m longevity hedging deal by the Royal County of Berkshire pension fund. (See earlier IPE article: Berkshire completes first LGPS longevity deal)
Clive Wellsteed, partner at LCP, said: "Buy-ins and longevity swaps have rapidly become a standard part of the toolkit for companies to reduce legacy pensions risk. Further deals will close over 2010 as schemes that postponed activity in the height of the financial crisis now reach completion," he added.
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