The pension scheme of FTSE250 clay brick manufacturer Ibstock has struck a a £340m (€367m) buy-out with Just Group covering just over half of its liabilities.
The transaction was hailed as a milestone both for the pension scheme’s overall journey plan and Just’s defined benefit (DB) solutions business.
It covers more than 1,800 pensioners and is Just’s largest single deal and 200th since entering the DB de-risking market in 2012.
The trustees were advised on the transaction by LCP, Buck and Addleshaw Goddard, with Pinsent Masons providing legal advice to Just.
Rachel Tranter, director of BESTrustees and the chair of trustees for the Ibstock Pension Scheme, said: “I am delighted to have been able to lead the trustees to take practical and cost-effective steps to improve the security for all members of the scheme.
“Just provided clarity during a time of huge global uncertainty and our advisers skilfully guided us through the process to a successful conclusion; we always felt in safe hands and we’re pleased with the end result.”
James Forrest, scheme actuary at Buck, said regular dialogue with the trustees and sponsor, combined with ongoing work in relation to data, benefits, and investment strategy, “enabled the transaction to move at a fast pace when pricing was favourable”.
According to David Steward, partner at LCP, since the lockdown the consultancy has now helped 23 pension schemes take advantage of attractive pricing post-COVID-19.
According to Ibstock’s interim results, as at 30 June the scheme, which is closed to future accrual, had an actuarial accounting surplus position of £61.2m, down from £88.7m at the end of December 2019, with asset levels of £656.2m and liabilities of £595m.
One in six report long-term covenant damage
Only 16% of pension schemes surveyed by Willis Towers Watson (WTW) agreed that the coronavirus pandemic had weakened their sponsoring employer’s ability to stand behind the scheme in the long term, the consultancy has relayed.
One in three (35%) reported a negative short-term impact on the employer covenant.
WTW surveyed 129 defined benefit (DB) trustee and corporate representatives for its latest DB survey, with responses received between 27 August and 7 October.
Graham McLean, head of funding at the consultancy, said: “These numbers are less gloomy than might have been feared, with most schemes believing they have got through the first phase of the pandemic with the employer covenant more or less intact. The Pensions Regulator also said last week that fewer employers had deferred deficit contributions in response to severe cash constraints than had been expected.
“But a meaningful proportion of schemes fear that, although the economic consequences of the coronavirus have not been fatal for their sponsor, they have done lasting damage to its financial health.”
Perharps the most surprising finding, however, accoding to McLean, was that while 64% of trustees thought they would reach their current long-term objective in no more than nine years, only 28% of corporates thought this likely.
According to the survey, almost 40% of corporate respondents now expect goals to be achieved 15 or more years out, compared to only 10% of trustees.
McLean said the disparity may signal that “trustees and corporates will enter the next round of negotiations with starting positions that are further apart than they have been for many years”.
“Creative solutions will have to be explored if they are to find common ground.”