UK - The £3.9bn (€4.9bn) Pensions Trust has tapped UK buyout company Paternoster to secure £225m worth of pension assets of its occupational Growth Plan pension scheme.
The trust - a multi-employer scheme for 4,200 pension funds in the charitable, social, educational, voluntary and not-for-profit sectors - said it has purchased an insurance policy to secure the benefits of the pensioner section of the plan, a closed industry-wide occupational pension scheme within the trust for non-associated employers in the charitable and not-for-profit sector.
John Alleston, chair of Verity Trustees, the corporate trustee of The Pensions Trust, commented the organisation had been working on solutions to reduce the downside risks that Growth Plan was exposed to.
"Having taken advice from HSBC Actuaries and Consultants and Mercer, the trust's actuarial and Investment consultants, and discussed the way forward with the consultative group representing the employers, we decided that investment in a bulk annuity policy from Paternoster offered the best first step to give Growth Plan members greater certainty and additional security and protection," said Alleston.
The trustees will review opportunities to insure the deferred member liabilities as and when funds allow.
The decision to reduce downside risk was not straightforward for the Growth Plan, according to Alleston, because it also all but eliminates the prospect of future discretionary bonuses.
He said: "But we have to be realistic and prudent in a world which economics and legislation has made much more difficult for pension funds generally and the Growth Plan in particular."
The Trust's 31 stand-alone final salary schemes, five multi-employer defined benefit schemes, the Flexible Retirement Plan, Unitised Ethical Plan, and a Career Average Revalued Earnings (CARE) Scheme, are not affected by the deal.
At the the Pension Plan Financial Risk conference in April this year, Logan Anderson, head of customer relations at the trust, told delegates he expected the buyout market continue to grow and suggested the increase in providers could allow trustees and employers to make a profit.
He pointed out a buyout would previously have been a natural option for mature schemes, but given the increase in suppliers - from two to 15 - it is now "something of a supply and demand" situation.
Anderson revealed at the time that one of its clients had been considering a buyout option and after receiving quotes form various companies, he said he was "astonished" at how close the buyout cost was to the actuarial value of the scheme's liabilities.
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