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Impact Investing

IPE special report May 2018

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UK roundup: T&N pension plan, L&G, PPF, F&C Asset Management, Hymans Robertson

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  • UK roundup: T&N pension plan, L&G, PPF, F&C Asset Management, Hymans Robertson

UK - The T&N retirement benefits scheme has signed a £1.1bn (€1.26bn) bulk annuity contract with Legal & General (L&G) as part of its plan to wind up outside the Pension Protection Fund (PPF).

Given that the pension scheme's financial strength exceeded the threshold at which the PPF would automatically step in, the trustees had by law to prepare to move outside the PPF.

The T&N retirement benefits scheme, which has been in a PPF assessment period since 2006, selected L&G following a competitive selection, due diligence and negotiation process.

Mercer advised the trustees on the transaction, with Allen & Overy providing legal advice.

Meanwhile, F&C Asset Management has announced it will strengthen its institutional business and will focus more on insurance and final salary pension fund clients in the future as part of its new strategy.

The plan, which was announced by the new chairman Edward Bramson, will comprise two phases.

The first phase will aim to cut back office and corporate staff functions in order to cut costs to £33m and will be introduced before the end of the year.

The second phase will focus on the growth of the institutional business.

Under the new strategy, F&C Asset Management will focus on 'core' products with an attractive financial model based on being highly scalable, having a low variable cost for each additional unit of AUM and with relatively low revenue volatility.

The company also defined its core products as being strongly aligned to current client needs and as having a good investment performance record for at least three years.

According to the firm, these products will leverage the increasing convergence of the needs of insurance companies seeking to address solvency issues and those of defined benefit pension schemes, which are seeking to immunise their liabilities.

Finally, a new report has found that one third of the FTSE 350 have more than 20% of their market cap exposed through un-hedged liabilities in their pension schemes.

According to the Hymans Robertson's annual FTSE350 Pensions Analysis, the aggregate FTSE 350 pension deficit dropped in 2010 from £142bn to £43bn, but the recent market turmoil has halted these improvements.

On average, FTSE 350 company pension deficits have fallen to 2% of market cap, down from 6% in 2009. The same companies could pay off their pension deficit with 54 days of earnings, down from 208 days' earnings in 2010, the report found.

However, despite these improvements, the majority of FTSE 350 companies continue to hold significant risks in the form of un-hedged pension scheme liabilities.

The report also said these risks are unlikely to yield upside for shareholders as companies are not typically able to access any pension scheme surpluses but remain fully exposed to the effect of scheme deficits.

In addition, the report found substantial differences between the health of schemes in different industries.

In the financial sector, only 7% of companies have a scheme deficit exceeding 10p in the pound of market cap, while the industrial sector remains hamstrung by large legacy pension deficits, spending an average of 28 days company earnings on their schemes in 2010, compared to 19 days for the Index as a whole.

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  • QN-2436

    Asset class: Real Estate - Core Open-ended Real Estate Equity Fund (non-listed).
    Asset region: Asia Pacific.
    Size: Approx. CHF 70-100m per investment.
    Closing date: 2018-05-25.

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    Asset class: High Yield Bonds.
    Asset region: US.
    Size: USD 300 million.
    Closing date: 2018-05-25.

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    Closing date: 2018-05-31.

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