UK - The UK Can Pension Plan has agreed a buyout deal with Pension Insurance Corporation (PIC) valued at £42m (€52m), following completion of the Pension Protection Fund's (PPF) assessment period.
The defined benefit (DB) scheme came under the protection of the PPF in October 2006 when administrators were appointed to the fund, and it entered the assessment period - which determines whether the scheme is eligible for entry to the PPF - in December 2006 after the sponsoring employer UK Can Limited, a maker of aerosol cans, became insolvent.
During the assessment period the PPF determines whether the scheme can be "rescued", either by the sponsoring employer or a takeover by a new firm, and whether the scheme can afford to "secure benefits" that are at least equal to the compensation paid out by the PPF - which is 100% for pensioners, ill-health retirees and dependents and up to 90% for non-pensioners or early retirees.
UK Can Limited was liquidated in 2007, but it is understood the pension plan was funded to a level at which it could afford to secure higher benefits than PPF compensation levels, so the trustees of the scheme initiated a buyout auction.
Paul Jayson, partner at Barnett Waddingham, which acts as actuary and administrator to the UK Can Pension Plan, said following a "detailed due diligence" process, including a review of the "quality and strength of its regulatory capital", the trustees selected PIC as the buyout provider.
Although the pension plan is still technically in the PPF assessment period, a spokeswoman for the PPF confirmed a Section 143 valuation has been formally approved and it expects the scheme to "exit the PPF in about eight weeks".
The terms of the buyout mean this is the smallest deal PIC has completed so far but it will secure the benefits of 900 members in return for £42m in assets from the pension plan.
The agreement brings the total pension buyout assets managed by PIC to £550m, although taking into account other areas including sponsored pension fund deals - such as Threshers, Thorn and Telent - Pension Corporation now manages almost £5bn in pension assets.
Chris Martin, managing director of Independent Trustee Services, said the "majority of members are likely to achieve a far better outcome than they would have anticipated when the PPF assessment period started" as a result of the deal.
"It has been a very difficult couple of years for them. We were particularly pleased with PIC's approach of putting members at the forefront of the process. A key factor in the decision of the Trustee to choose PIC was its willingness to tailor a solution to make the transition as smooth as possible," added Martin.
PIC secured its first buyout deal earlier this year with Raven Mount for the Swan Hill Pension Plan in May 2008, in exchange for assets valued at £72m, and before completing a £451m partial buyout of the Delta pension plan in June. (See earlier IPE articles: Swan Hill marks first PIC buyout and Delta agrees partial buyout with PIC)
Edmund Truell, chief executive of Pension Corporation, said: "This agreement emphasises Pension Corporation's expertise and flexibility in being able to offer a comprehensive set of affordable solutions to defined benefit (DB) funds of any financial strength, size or maturity profile."
"It also demonstrates how we can enhance retirement benefits for members of a pension fund under the protection of the PPF and give each member the reassurance of having their own individual pension policy," he added.
The PPF admitted in a consultation in February that changes to mortality assumptions for its section 143 and 179 calculations could result in less schemes being eligible for the PPF as the changes would bring valuations into line with buyout prices. (See earlier IPE article: PPF changes could reduce number of eligible schemes)
It then confirmed in May mortality assumptions would switch to a medium cohort, as of 31 March 2008, as the responses to the consultation had resulted in "general agreement that bulk annuity prices have reduced in recent months and that the proposed assumptions moved the section 143 and section 179 bases in the right direction".
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