UK roundup: Gwynedd, PIC, DENSO, Deutsche Börse, Club Vita
UK - Trustees and sponsors of the DENSO Manufacturing UK Pension Scheme and the DENSO Marston Pension Scheme have entered into a buyout agreement with Pension Insurance Corporation (PIC).
The buyout agreement, for around £200m (€240m) of liabilities, represents one of the first deals to cover accrued pensions and allow members to continue accruing future final salary benefits through insurance policies.
PIC previously insured three pension funds of UK subsidiaries of the DENSO Corporation in a 2009 transaction covering liabilities valued at £100m.
As with the previous transaction, the new agreement will be an ‘all risks’ pension insurance buyout in that PIC assumes all risks, including data verification, on signing of the contract.
Jay Shah, co-head of business origination at PIC, said: “To allow future accruals, whilst insuring the members’ benefits, may provide a lifeline to other pension funds and a possible way forward for other DB schemes whose sponsors will fund future accruals but wish to remove the funding volatility.”
Meanwhile, the Gwynedd Council Pension Fund has selected four asset managers as part of a framework agreement that will see one or more of them manage a global equity portfolio worth 20% of scheme assets.
Baillie Gifford, Walter Scott Global Investment Management, Veritas Asset Management and Wellington Management International have been selected as part of the framework for the active equity portfolio.
According to the contract award, the pension fund is seeking to establish a framework agreement comprising a number of unconstrained, long-only active global equity managers.
The asset managers’ investment objective will be to outperform a global equity index - provisionally, the MSCI AC World Index - by 2.5-4% per annum, measured over rolling three-year periods.
The mandate, first tendered in September last year, represents around a fifth of the £931m in total scheme assets.
The local authority fund - which, according to its most recent actuarial valuation, saw its funding ratio increase 12 percentage points year-on-year to 87% - said it would consider a wide range of investment styles.
It added that single or multiple mandates might be awarded concurrently or consecutively within the framework period of four years.
Finally, Deutsche Börse and Hymans Robertson’s longevity analytics arm, Club Vita, has launched a new series of longevity indices.
The ‘Xpect-Club Vita Indices’ will offer UK pension schemes an index-based alternative to better reflect the scheme’s risk profile when pursuing longevity swaps.
Deutsche Börse and Club Vita said that, with existing longevity indices, schemes that want to pursue an index-based swap must address the basis risk that results from the gap between their specific risk profile and the longevity risk of the population.
Andrew Gaches, longevity consultant at Club Vita, said: “Longevity swaps are one de-risking option that schemes are increasingly pursuing, but up until now these have been the preserve of the largest schemes and have focused on their pensioner members only.
“Looking ahead, longevity swaps are likely to be particularly attractive to pension schemes looking for short-term protection against longevity while they get ready to remove all their risks in the medium term.”