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Commerzbank UK scheme insures DB and DC sections for £1.2bn

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The UK arm of Commerzbank has insured both its defined benefit and defined contribution schemes with Pension Insurance Corporation (PIC) for £1.2bn (€1.4bn) – the country’s biggest pension risk transfer deal this year.

The transaction involved converting a £300m defined contribution (DC) plan into a defined benefit (DB) arrangement, before then being added to the buy-in deal.

David Curtis, director at Law Debenture Pension Trustees and chairman of the Dresdner Kleinwort Pension Plan trustee board, said the transaction “required a high level of creative thinking” from consultancy LCP to address the DC section. Curtis also praised PIC for its flexibility on what he described as “an unusual transaction”.

The DB and DC funds were both part of the Dresdner Kleinwort Pension Plan, which came to Commerzbank as part of its acquisition of Dresdner Bank in 2009.

It follows a bumper year of pension transfer deals for PIC in 2018, including a £1.3bn buy-in with Siemens in July and a £1.5bn buy-in with Rentokil Initial in November.

Separately, rival pension insurer Rothesay Life has backed a £110m full buyout of the Laird Pension Scheme, connected to UK electronics company Laird.

It covers the benefits of 370 deferred members and 570 pensioners, according to Rothesay Life. The DB scheme is expected to wind up later this year once the transfer is completed.

Tom Ashworth, transactions specialist at Willis Towers Watson and lead adviser to the Laird Pension Scheme, said the trustees had come up with “a clear project plan and decision-making framework”, helping to ensure “healthy competition for a complex scheme and ultimately resulting in favourable pricing”.

Cleo Taylor, business development director at the insurer, said: “With the rapid improvement in solvency levels, the demand for full scheme buyouts is particularly strong. To meet this demand we have been growing our new business team across underwriting, implementation and business development.”

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Readers' comments (1)

  • A bewildering headline -- just how do you "insure [a] DC [section]"? -- quickly clarified in the body of the article: "a £300m defined contribution (DC) plan [was converted] into a defined benefit (DB) arrangement, before then being added to the buy-in deal."

    It prompts the question, is it ever possible to insure -- in a meaningful way -- a DC pension scheme? Ignoring life insurance, which may be offered as an adjunct, presumably you'd be looking at an insurer offering to sell deferred annuities to (active) members? I suspect this would be perceived by members as being a prohibitively expensive option. But it would be interesting to know if anyone (i.e. any board of trustees of a DC scheme) has ever looked into the feasibility of this.

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