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Pension Insurance Corporation wins more business with £320m buy-in

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  • Pension Insurance Corporation wins more business with £320m buy-in

UK - In the biggest UK bulk annuity deal this year, Pension Insurance Corporation (PIC) has agreed a £320m (€411m) pensioner buy-in with the Cookson Group pension plan.

The deal adds to the growing volume of buy-in business won in the last few months by the UK insurance unit of Pension Corporation this year.

The transaction covers around 60% of the total liabilities the Cookson Group scheme for an insurance premium of around £320m, which will be met from existing assets of the scheme, PIC said.

It covers pensions relating to around 3,300 pensioners, said Aon Hewitt, which advised the trustee of the scheme.

Allan Course, chairman of the trustee, said: "The buy-in means the UK plan is now fully protected against interest rate, inflation and longevity risks in relation to a significant proportion of its liabilities."

He said the trustee was "delighted" with the flexibility and responsiveness of the PIC team, and the support from Aon Hewitt and its other advisers, in completing the transaction.

The deal was the biggest transaction of 2012 in the bulk annuity market, after a relatively quiet start to the year, according to Aon Hewitt.

Paul Belok, principal in the firm's risk settlement group, said: "We are aware of a reasonable level of activity currently taking place and can expect to see some more sizeable deals by the end of the calendar year.

"In particular, we are seeing interest from schemes looking to take advantage of the currently attractive bulk annuity pricing relative to gilt yields."

Earlier this week, PIC announced the completion of a £15m buy-in of liabilities for the Graham & Brown Retirement Benefits scheme.

This followed last week's announcement of a £100m buy-in deal with the Aon Minet pension scheme covering around a quarter of the scheme's pensioner liabilities.

In May, PIC took on £160m of liabilities from the Gartmore Pension Scheme in a buy-in.

At the beginning of July, Swiss investment fund Reinet said it would invest as much as £400m in the Pension Corporation - funds PIC said it would use to expand in the UK pension insurance and risk transfer market.

PIC has insured around 60,000 pension fund members and has assets of around £5.5bn.

Jay Shah, co-head of business origination at Pension Corporation, said the large number of pensioner buy-ins completed recently have been driven by the increase in value of gilts and bonds.

Meanwhile, consultancy LCP said the latest plunge in gilt yields, which has sent yields to a new record low in the last week, made bulk annuity opportunities still more appealing.

Emma Watkins, principal at LCP, said: "Many pension schemes have taken advantage of the opportunity this has provided - schemes holding UK gilts have seen their value rise significantly and pensioner buy-in pricing relative to gilts being at its most favourable since 2008. 

"The most recent fall in gilt yields makes this opportunity even more attractive, with widening credit spreads facilitating even more competitive bulk annuity pricing."

This was allowing schemes wanting to convert gilt holdings to an insurance policy, to do so with little or no funding strain on a technical provisions basis, Watkins said.

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