Stagecoach Pension Scheme (SGPS) has transferred its £1.2bn (€1.3bn) pension fund to Aberdeen in a move it said will bring “significant benefits to its 22,000 members”.
Under the arrangement, the plan, which has a strong surplus position, will continue to run on and Aberdeen will take on responsibility for its funding as well as the management of the fund’s assets.
Aberdeen stated that the run-on model “ensures long-term security for the scheme, will support better inflation protection for members and includes an additional initial pension increase of circa 1.5% for all members”.
The manager added that these benefits together represent an immediate allocation of over £50m of the scheme’s surplus for members.
The ability to invest in productive assets, which the arrangement provides, also offers the prospect of further pension increases for scheme members in the future, Aberdeen stated.
Aberdeen will receive a minority share of any future distributed surplus, with the majority earmarked for members, all subject to robust guardrails that ensure the scheme’s financial security. Given the pension fund’s strong funding position, this will have no significant impact on Aberdeen’s capital position, the manager added.
Stagecoach Group said this transaction meets its objective of simplifying its business through settling its arrangements with the SGPS and ensures that the interests of pension scheme members and Aberdeen are “closely aligned”.
It follows Aberdeen’s decision earlier this year to run on its £2.6bn defined benefit pension scheme, with surplus unlocked for the benefit of Aberdeen and the scheme’s members.
Aberdeen group chief executive officer Jason Windsor said: “This is a landmark agreement that will deliver significant value to Stagecoach’s scheme members, and to Aberdeen. The scheme’s strong funding position allows Aberdeen to take on the responsibility for managing the fund and provides the opportunity to enhance member benefits by investing in productive assets.”
He added: “The agreement, which aligns with the UK’s goal of making pension capital work harder for the economy, brings £1.2bn in new assets under management and opens up new investment opportunities. We believe in the run-on model for well-funded schemes, having already taken this approach for our own scheme.”
Trustee chair for SGPS, John Hamilton, said: “Our objective was to consider what would provide the best pension outcomes for the scheme members.
“With a significant starting surplus in the scheme built up over many years and prospects for further sustained growth in the fund, our goal was to run on the pension scheme to provide better inflation protection and higher pensions for our members using the scheme assets under secure funding arrangements.”
Stagecoach Group chief financial officer Bruce Dingwall said that he believed the transfer to Aberdeen would “allow members to benefit from a strong sponsor and an expectation of further benefit improvements over time”.
“For Stagecoach, this transaction gives us a clean break from the large defined benefit pension scheme, which supports our objective of simplifying our business,” he added.
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