Pension Insurance Corporation (PIC) has backed a £725m (€823m) buy-in with the Former Registered Dock Workers Pension Fund, a multi-employer scheme for workers in ports and shipping companies around the UK.
In a statement, PIC said the transaction had completely removed liability risk from the pension fund, following previous insurance transactions.
The trustee board had completed “significant preparatory work”, PIC added, allowing it to seal the deal at an ”attractive” price. The transaction was funded from scheme assets without the need for additional contributions from sponsoring employers, according to the insurer.
Ken Hardman, partner at LCP, which advised on the deal, said: “This demonstrates the benefit of investing in work up front, which enabled even a complex transaction such as this to be carried out quickly and efficiently. Pricing has improved markedly due to lower longevity expectations and increased insurer competition, and the fund was able to seize this opportunity.”
BAE Systems finalises deficit recovery plan
Aerospace giant BAE Systems plans to cease deficit reduction contributions into its £21.4bn pension scheme by 2026, according to a stock exchange announcement.
The FTSE 100-listed company is currently scheduled to pay £220m into the scheme next year, with future contributions linked to increases in shareholder dividends.
However, following a formal valuation of the scheme as of 31 March 2017 and subsequent discussions with the scheme trustees and the Pensions Regulator, BAE Systems said it would begin reducing its deficit reduction contributions from 2022. The contributions would cease entirely from 2026.
BAE will contribute a further £50m if the scheme’s funding level falls below a certain level.
The company said its pension liabilities had reduced due to changes in “both actual and forecast mortality rates since the last valuation” in 2014.
UK pension funds selling UK equities
Domestic pension funds held just 3% of UK listed stocks at the end of 2016, according to the Office for National Statistics (ONS).
While the nominal value of UK equities held by pension funds increased by £0.6bn since the end of 2014, to £60.6bn, this increase trailed the 17.9% gain posted by the FTSE All Share index in the same period, implying UK funds were net sellers.
Since the end of 2010, the ONS’ data showed that UK pension funds’ domestic equity holdings had shrunk from £103.3bn, or 5.6%.
At the same time, foreign ownership of equities grew from 43.1% to 53.9%, to more than £1.1trn at the end of last year.