UK roundup: CovPress, PPF, de-risking, LGPS Framework Agreement
A UK pension scheme has for the first time been lifted out of an assessment period with the Pension Protection Fund (PPF) in a deal that secures members’ benefits in full.
CovPress, a UK manufacturer that went into administration last September and whose pension scheme has been in a PPF assessment period, has been acquired by industrial group Liberty House in a deal reached overnight.
The CovPress pension scheme is being transferred as part of the sale.
Joint administrator of the deal, Eddie Williams of Grant Thornton, said: “This has avoided the scheme’s passing into the Pension Protection Fund through an ongoing employer, which we understand has never been previously achieved for a business in administration. This has been pivotal to the outcome of the administration.”
Lane Clark & Peacock advised Liberty, and Timothy Sharples, partner at the pension specialists, said “the members of the pension scheme can now look forward to receiving their benefits in full rather than reduced benefits from the Pension Protection Fund”.
A spokeswoman for the PPF said: “In this instance, we were not needed, as the purchaser of the Covpress business voluntarily agreed to take on responsibility for the pension scheme. This has achieved a better result for the scheme members and the PPF.”
The PPF acts as a rescue fund for pension schemes whose sponsoring employers have gone into administration and do not have sufficient assets to pay benefits matching or exceeded PPF levels of compensation.
Schemes go through an assessment period before entering the fund.
There have been instances of other deals being struck to prevent UK pension schemes from falling into the PPF, such as that of the Uniq scheme in 2011 and MIRA Retirement Benefits Scheme in 2015, but these have been buyout deals with insurers and involved a reduction in member benefits, while still exceeding PPF compensation levels.
Alex Waite, partner at LCP, told IPE these deals were sometimes referred to as “PPF plus” deals but that the CovPress case was unique because it constituted a full rescue.
“This is unique because it is as if the scheme had never gone into the PPF assessment in the first place,” he said. “It doesn’t reduce member benefits, which has never been done before.”
In other news, the UK’s Civil Aviation Authority (CAA) Pension Scheme has completed a £90m (€104m) buy-in deal with the Pension Insurance Corporation (PIC) in a second de-risking step.
The CAA scheme provides defined benefits to the employees of the National Air Traffic Services and the CAA, and had assets of £2.2bn as at 31 March 2016.
The deal with PIC, announced today, is the second de-risking transaction for the scheme, after it completed a £1.6bn bulk annuity with Rothesay Life in 2015.
Aon Hewitt and Reed Smith advised the scheme.
Paul Belok, partner in the former’s risk settlement group, highlighted the agreement of a price lock during an exclusivity period with PIC as a “particularly positive” feature of the transaction, as this meant the terms of the deal were not affected adversely by market movements during the relatively volatile period before the risk was transferred.
Just Retirement today announced that it has completed a £36m medically underwritten bulk annuity deal covering the liabilities of fewer than 50 members of the defined benefit pension scheme of Aliaxis, an industrial company that makes products such as electrical ducts and conduits, and draining systems.
Meanwhile, providers of stewardship advisory services have been selected for a new National Framework Agreement available for use by administering authorities of UK local authority pension schemes and other public sector pension bodies.
Norfolk County Council ran an EU procurement process on behalf of several local government pension schemes (LGPS) for a multi-provider framework that covers services split into five “lots”, mainly covering voting and engagement but also “stewardship research and data services” and “stewardship-related project services”.
The providers that made the cut for various services were: BMO Global Asset Management, FTSE Russell, GES International, Glass Lewis Europe, Hermes EOS, Manifest information Services, Mercer, MSCI ESG Research, oekom research, Pension & Investment Research Consultants, Robeco Institutional Asset Management, Sustainalytics UK and Vigeo Eiris.
Only with respect to one service category, for combined voting and engagement services, was no cut made; five offers were received, and five providers awarded a contract.
Depending on the type of service they require, pension scheme administering authorities will either have to run a further competition between the providers named to the National Framework Agreement, or they are free to choose from the list based on a “supplier catalogue”.