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GKN seals £190m buyout with Pension Insurance Corporation

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Engineering firm GKN has agreed a £190m (€222.7m) buyout with Pension Insurance Corporation (PIC) and begun to wind up its pension scheme.

The transaction covers 20% of the GKN Group Pension Scheme’s liabilities, which were £848m at the end of 2015, according to the company’s annual report.

Remaining members of the scheme will be transferred to a new fund, allowing the legacy pension scheme to be wound up.

Members with small pension pots will be offered a lump-sum transfer to exit the scheme altogether.

Matt Richards, actuary at PIC, said: “The trustee has moved proactively and in a considered manner to achieve a strong outcome. This transaction is part of a long-term de-risking strategy undertaken by the trustee, which allowed them to take advantage of a window of favourable pricing.

“The trustee should be congratulated for acting in a decisive manner to reduce risk across all pensions, not just those that have been insured.” 

David Ellis, UK leader for bulk pensions insurance advisory at Mercer and adviser to the GKN trustees, praised the scheme for its willingness to innovate.

“This latest transaction is testament to the long-lasting benefit of taking proactive action to manage pension risk,” he said.

GKN’s main defined benefit schemes in the UK, the US and Germany had combined liabilities of more than £4bn at the end of 2015, its annual report said.

The GKN Group Pension Scheme’s liabilities were £848m, primarily relating to pensioner members.

GKN’s trustees completed two buy-ins with Rothesay Life in 2014 and 2015, worth £123m and £53m, respectively.

The scheme also enacted a pension increase exchange in 2015, agreeing to raise benefits for members in exchange for their giving up guaranteed increases.

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