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Siemens insures £1.3bn of liabilities with Pension Corporation

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Technology group Siemens has completed a £1.3bn (€1.5bn) buy-in of UK pension liabilities with Pension Insurance Corporation (PIC).

The deal covers 6,000 members of the Siemens Benefits Scheme and is the third time PIC has insured defined benefit (DB) scheme liabilities for Siemens in the UK.

John Smith, head of pensions at Siemens, said: “We are proud of what we have achieved with this latest buy-in, which is part of Siemens’ long-term pension de-risking strategy. This is one of a number of UK DB pension schemes sponsored by Siemens and achieving this is a significant milestone for the company.”

Joanna Matthews, chair of the scheme’s trustee board, highlighted the “speed and efficiency” of the transaction.

The deal accounted for more than a third of PIC’s total new business flows in the first half of 2018, the insurer said.

On Monday it reported the completion of an £850m buyout with PA Consulting’s DB scheme, and also recently backed a £200m buy-in for the Kingfisher pension fund.

PIC’s previous work with Siemens included a £300m buy-in in 2016, using a captive insurer model.

‘Unprecedented’ de-risking activity

Insurers and advisers have been talking up the potential of the UK’s de-risking market for some time. PIC actuary Matt Richards said the market had become “increasingly bouyant” as companies sought to secure their balance sheets.

Stuart O’Brien, partner at Sackers, which advised on the Siemens deal, added that his firm was seeing “an unprecedented level of buy-in and buyout activity”.

Data published today by consultancy group Hymans Robertson showed that the combined value of buy-in and buyouts so far this year exceeded the value for the whole year in each year up until 2013.

The company cited “very attractive pricing” from insurers and strong recent equity market performance that has encouraged pension funds to lock in gains.

James Mullins, head of risk transfer solutions at Hymans Robertson, said 2018 could see as much as £35bn worth of transactions, including insurers transferring legacy annuity business to other insurers. 

He added: “The end of the 2018 is shaping up to be very interesting. In the current busy market, insurers have more choice than ever regarding which schemes they wish to engage with and use their best pricing on.”

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