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IPE special report May 2018

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UK roundup: Guinness Peat Group, TPR, PIC, Towers Watson, ABI

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Guinness Peat Group (GPG) has warned shareholders that it is likely to be forced by the Pensions Regulator (TPR) to cancel a planned cash distribution, in order to plug deficits in three UK pension funds which it sponsors.

The strategic investment holdings group, which is listed in the UK, New Zealand and Australia, has sold off its portfolio of global investments over recent years, raising around £700m (€834m). Half of this amount has already been paid out, through cash payments and share buybacks.

GPG meanwhile is to continue as the parent of textile manufacturer Coats.

However, TPR has been investigating the Coats Pension Plan, Brunel Holdings Pension Scheme and Staveley Industries Retirement Benefits Scheme in order to ascertain whether to take action over potential underfunding.

If the TPR considers the sponsoring employer of a pension scheme is insufficiently resourced, it may issue a financial support direction (FSD) against a fellow group company of the sponsor. This would affect GPG’s plans to return surplus capital to shareholders.

In an interim management statement, GPG said the TPR had already found that the Brunel and Staveley scheme sponsors were insufficiently resourced as at 31 December 2011. The regulator is still carrying out work to ascertain whether any of the three sponsoring employers of the Coats Pension Plan may also have been insufficiently resourced at that date.

If TPR considers it is reasonable to take action via an FSD, its next step would be to issue a warning notice.

The GPG board said it anticipated it would receive such a notice by the end of the current year.

It is not clear at this stage what figure the TPR will place on the pension fund deficits, although the 2012 triennial valuation for the Coats Pension Plan showed a funding deficit of £215m.

A GPG spokesman said it was also not clear how much money would potentially be needed to tackle the deficits.

In other news, the NCR Pension Plan has completed a £670m buy-in with Pension Insurance Corporation, covering the benefits of over 5,000 members.

The bulk annuity transfer was the result of a “full and thorough tender process” according to Stephen Swinbank, chair of the trustees.

The consumer transaction company’s treasurer and vice president John Boudreau added: “The agreement between NCR and the trustees is part of the third phase of NCR’s pension transformation strategy that aims to reduce our global liability and increase recurring free cash flow.”

Jay Shah, co-head of origination at PIC, noted that the increase in long-term interest rates, coupled with better returns among many defined benefit funds, meant that both buy-ins and buyouts had become “more affordable”.

Towers Watson’s senior consultant Colette Christiansen, who advised the trustee on the transaction, said the deal underscored the benefits of a buy-in if trustees were “willing and able” to act on favourable market conditions.

“Despite the concerns about capacity that were raised when some providers left the market, schemes that look serious about transacting have found that pricing is competitive,” she added.

Finally, the Association of British Insurers (ABI) has launched the first comprehensive review of the UK’s retirement needs.

The association said the review would cover individuals’ financial needs and concerns about retirement, how effectively the current state and private pension products cater for retirement needs, and what changes are needed to ensure adequate retirement incomes.

The ABI is seeking views and evidence from pensions experts, think-tanks, consumer groups, health organisations, unions and politicians.

Huw Evans, director of policy, ABI, said: “It is becoming increasingly clear that we need to consider a new approach to meeting people’s changing retirement needs.

“Rising life expectancy, a sustained low interest rate environment and our culture of under-saving means that our current approach to retirement is unlikely to be fit for the future,” he added.

Responses should be submitted by 20 December, following which the ABI will conduct a series of workshops early in 2014 with key stakeholders, including consumer groups, to discuss the issues raised.

A final report, including recommendations for reform, will be published in spring 2014.

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