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Recruitment firm insures £271m of pensioner liabilities with Canada Life

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UK recruitment company Hays has secured a £271m (€301.5m) insurance buy-in with Canada Life, securing the pensions of all its retired members as of 31 December 2017.

In its preliminary results for the 12 months to 30 June 2018, Hays said its defined benefit (DB) pension scheme’s trustees had finalised the deal on 6 August without need for additional funds from the sponsor.

“This material balance sheet derisking exercise is in line with Hays’ long-term strategy to reduce future volatility of the group’s defined benefit schemes, and their financial impact on the group,” Hays said in its results statement.

The transaction was the first for Canada Life in 2018, but Richard Priestley, executive director at the company, said it had several other deals close to completion.

“Our approach is to price selectively to achieve attractive returns that work for all parties,” he added. “Given our portfolio of assets we are able to offer a competitive price that works for both Canada Life and our partners.”

Hays’ £798m scheme was operating with a £76m surplus at the end of June on an IAS19 accounting basis, the company said.

It added: “The surplus was primarily due to favourable changes in both demographics and financial assumptions (an increase in the discount rate and a decrease in the inflation rate), together with an increase in asset values.”

The scheme has been closed to future accrual since 2012.

Favourable insurance company pricing and improved funding for DB schemes have led to a wave of bulk annuity transactions in 2018. Consultancy group Aon reported earlier this month that £20bn worth of deals had been struck in the first half of the year, putting the UK pensions market on course for a record derisking year.

Derisking transactions announced in 2018:

DateScheme / FirmInsurerSize (£m)Type of transaction

Feb-18

National Grid Electricity Group

Zurich/Canada Life Re

2,000

Longevity swap

Feb-18*

WPP (five schemes)

PIC

140

Buyout

Feb-18*

Post Office

Rothesay Life

450

Buy-in

Feb-18*

Sea Containers 1983 Scheme

Aviva

190

PPF+

Feb-18

Unnamed scheme

L&G

150

PPF+

Mar-18

Prudential

Rothesay Life

12,000

Bulk annuity back book

Apr-18

Kingfisher

PIC

209

Buy-in

May-18

Toshiba

Rothesay Life

170

Buyout

May-18

Marks & Spencer

Aviva

925

Buy-in

May-18

Marks & Spencer

Phoenix

475

Buy-in

Jun-18

Littlewoods

Scottish Widows

880

Buy-in

Jun-18

BAA Pension Scheme

L&G

325

Buy-in

Jul-18

PA Consulting

PIC

850

Buyout

Jul-18

Siemens

PIC

1,300

Buy-in

Jul-18

600 Group

PIC

201

Buyout

Jul-18

Civil Aviation Authority

PIC

60

Buy-in

Aug-18

Unnamed scheme

L&G

300

Longevity swap

Aug-18

Hays

Canada Life

271

Buy-in

Source: JLT Employee Benefits, IPE

* Although announced in February 2018, transactions marked with an asterisk traded in the second half of 2017

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