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IPE special report May 2018

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UK travel firm TUI adds to Dutch closure with PIE, shift to DC

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TUI Leisure has continued its push to de-risk its European pension schemes by conducting a pension increase exchange in the UK, and closing its defined benefit (DB) offering in Norway.

The UK-based leisure company, with operations across Europe, had previously closed its DB scheme in the Netherlands.

It was replaced by a defined contribution (DC) vehicle and reduced balance sheet liabilities by £14m (€17m).

It has now confirmed the closure of its Norwegian DB offering, adding another £4m in saved liabilities, and a replacement DC offering.

In the UK, the company’s three DB schemes – which were acquired through takeovers – began offering pensioner members a pension increase exchange.

The incentive exercise, which is strictly controlled by a mandatory industry-led code of conduct, see retiring members receive a higher starting pension, in exchange for no, or limited, increase in the payable pension.

TUI schemes will now only offer statutory increases to members that opted for the increase, which reduced liabilities by £33m.

In a statement, the company said: “The level of acceptances reduced the present value of future pension liabilities. The credit is taken to the income statement under IAS 19 (revised), as it represents a change in plan benefits.”

TUI and its schemes had previously taken measures to plug the deficit among its three funds by holding its sponsor’s brand names as collateral value.

In an innovative arrangement in 2011, the scheme was the first in the UK to hold intangible assets as collateral over its sponsor aimed at deficit reduction.

At the time, the scheme had deficit of more than £400m, but used the Thomson and First Choice travel brands to generate an annual £33m payment into scheme via royalties.

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