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UK roundup: Balfour Beatty, Just Retirement

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Balfour Beatty has re-negotiated the terms of its pension fund recovery plan, transferring ownership of £85m (€115m) in private finance initiative (PFI) assets to a new limited company.

The firm would not be drawn on the ownership arrangements of the limited company, but similar asset transfers to Scottish Limited Partnerships have been used as a vehicle for asset-backed funding agreements in lieu of contributions to pension funds in deficit.

According to Balfour Beatty’s 2013 annual report, the Balfour Beatty Pension Fund was 88% funded at the end of March 2013.

At the time, the sponsor agreed to an eight-year recovery plan that would have seen payments of £460m made over the course of the agreement.

In a statement to the London Stock Exchange, the company said today that an £85m deficit reduction payment would be made over an eight-year period, starting in 2016 with a £4m cash payment that would then increase in undisclosed increments.

It comes in place of an £85m cash payment promised as part of the £820m sale of Parsons Brinckerhoff, which would have also seen a £200m share buyback that the company cancelled in January.

Leo Quinn, the company’s chief executive, said he was pleased the trustee had agreed to the new arrangement.

“This gives a clear plan on how the pension deficit will be reduced over time, whilst maintaining balance-sheet flexibility as we drive the required organisational change and performance improvement, as set out in the Build to Last programme we announced last week,” he said. 

In other news, annuity provider Just Retirement has seen its annuity sales decline only 4%, despite the UK government’s no longer requiring individuals to annuitise pension pots.

In its interim report for the six months to December 2014, the company said it was able to offset the decline in individual business with a 39% increase in bulk annuity sales, with total business peaking above £660m.

Rodney Cook, Just Retirement’s chief executive, said he was “delighted” to be able to report “resilient” profits despite the regulatory changes.

For more on the bulk annuity market, read Taha Lokhandwala’s assessment of the growing business in medically underwritten bulk annuities

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