TI Group agrees partial buyout with L&G
UK - The TI Group Pension Scheme (TIGPS), one of the schemes belonging to the engineering firm Smiths Group, has agreed a £250m (€312m) partial annuity buyout deal with Legal & General.
Under the terms of the deal the pension scheme, which has a capital value of £1.4bn, has agreed to insure a portfolio of its pensions in payment, by transferring approximately £250m of its assets to L&G in exchange for regular annuity payments into the scheme.
Trustees of the pension scheme, who were advised by Aon Consulting, Mayer Brown International and Mercer, said partial buyout would "provide greater security and stability in the funding of all members' benefits".
In addition, although the bulk annuity purchase represents approximately 20% of the fund's assets, trustees said scheme pensioners would see no change in their benefits, which would continue to be paid direct to members through Smiths Pensions Limited.
Figures from Smiths Group interim results in March 2008 revealed the total surplus for the firm's pension schemes - which cover both funded and unfunded schemes across the world including the principal defined benefit (DB) schemes in the UK and US - reached £121.7m in February 2008.
However, this is a fall from a total surplus of £183.6m in July 2007, while the market value of its funded plan assets dropped to £3.25bn in February from £3.32bn in July 2007, although final results for Smiths Group in September 2007 showed the surplus for its UK funded pension schemes increased 173% to £331.5m. [See earlier IPE.com story: Smiths Group sees improved pensions surplus]
Mike Abrams, director of UK pensions for TI Group and spokesman for TIGPS, said: "The Trustee chose to purchase annuities to match a portion of the scheme's liabilities, the aim being to reduce the effect of changing investment and mortality conditions on the scheme's funding position."
The partial buyout follows a spate of buyout activity over the past week, as L&G announced a £180m deal with M-Real Corporation for its UK pension scheme, while Paternoster announced it would take responsibility for the closed Powell Duffryn scheme. [See earlier IPE.com story: Paternoster secures £400m PD pension plan]
In addition, the interim statement on L&G's first quarter results for 2008 revealed the insurer had quadrupled the volume of business from £17m in Q1 2007 to £72m in the first three months of 2008, although it admitted the majority of business is dominated by "shorter duration pensions in payment" rather than full buyouts.
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