Technology company Telent has secured a £4.7bn (€5.3bn) insurance buyout with Rothesay Life, the largest ever completed in the UK.
The company’s GEC 1972 Plan, a defined benefit scheme, will be insured by Rothesay through a buy-in – which remains as an asset of the pension fund – before being converted into a full buyout “before the end of 2022”, according to a statement from Aon, which advised on the transaction.
Upon conversion to a buyout, Rothesay will take on full responsibility for running the pension fund and serving its 39,000 members.
When complete, the deal will be the largest buyout ever completed, and covers 28,000 pensioners and 11,000 deferred members.
Heather Green, Telent’s chief financial officer, said: “The trustee of the GEC 1972 Plan has done a fantastic job to eliminate the significant funding deficit that existed in the plan only 10 years ago and get the scheme to a position where it can benefit from the hugely more secure future that this transaction provides…
“For Telent, being the sponsor of a scheme many times larger than our business was not ideal. We can now look forward to focusing more of our investment in our already successful technology solutions business.”
Brian Duffin, chairman of Stanhope Pension Trust, the scheme’s corporate trustee company, said the trustee had decided more than five years ago to target a buyout.
“Thanks to support from our sponsor Telent, and to an innovative investment strategy based on credit assets, we are now close to achieving our target,” Duffin said.
According to Redington, one of the trustee board’s advisers, the buyout had been secured 15 years ahead of the scheme’s initial target date.
Sammy Cooper-Smith, co-head of business development at Rothesay Life, said: “From our very first meeting with Telent, the trustee and Aon, they could not have been clearer as to what was required for the buyout to take place. This direct articulation allowed us to focus our resources and attention to meet these requirements and ensure the completion of the largest full scheme buy-out ever undertaken in the UK.”
Rothesay Life, a specialist pension fund insurer, had £37.7bn in assets as of 30 June 2019 and has grown significantly in recent years as a result of the UK’s booming bulk annuity market.
Earlier this month the company announced plans to raise £500m from its shareholders to prepare for a bumper period of new deals.
According to data from consultancy firm LCP, the Telent transaction meant 2019 was already a record year for buy-in and buyout deals, exceeding the £24.2bn worth of new business completed in 2018. With three months of the year left, most insurers and advisers have reported significant pipelines of deals yet to be completed.