Nova Chemicals pension plan pursues de-risking strategy, signs buyout

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  • Nova Chemicals pension plan pursues de-risking strategy, signs buyout

UK - The trustees of the Nova Chemicals UK pension plan have entered into a buyout agreement with Pension Insurance Corporation (PIC) at a time when pension schemes are increasingly considering buyouts as part of their de-risking plans.

The buyout will cover liabilities of £30m (€34m) of the Nova Chemicals pension plan.

The pension scheme pursued the buyout after trustees decided on a risk-taken approach, which includes investments in lower-risk assets and a shift away from equities, with the aim of minimising the scheme's exposure to potential market dislocations.

Martin Sanderson, plan trustee, said the deal would bring "further increased security to members' benefits for the long term".

A recent study by Hymans Robertson shows the pension scheme risk transfer market has grown by 400% between the first and second quarters.

The consultancy said the second quarter was one of the busiest for the market since the credit crisis of 2008, with £1.4bn of risk transfer deals completed, comprising buy-ins, buyouts and longevity swaps.

Hymans Robertson also said August's market turmoil was unlikely to slow the progress of planned longevity risk transfer deals, or buy-in deals for schemes whose assets were already well hedged to liabilities.

Earlier this year, Charlie Finch, partner at consultancy LCP, estimated UK pension plans were more willing to enter into insurance buyout agreements, with insurance companies adapting their products to better match pension liabilities.  

Finch said more sophisticated insurance products were coming to the market, driven by demand from pension plans and increasing competition among insurers.

According to him, insurance products are now more affordable for pensioners, costing up to 5% above the funding reserve.

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