UK - The CDC Pension Scheme has bought in insurance to back benefits for defined benefit members in a £370m (€417m) deal with Goldman Sachs subsidiary Rothesay Life, which has been structured to give the scheme "unique" security.
Trustees of the scheme made the announcement along with sponsor CDC plc - the UK government-backed emerging markets fund of funds, which has net assets of £2.3bn.
Under the terms of the buy-in arrangement, the £370m of assets used for the transaction will be retained in the scheme as collateral, as a way of providing more security, said Mercer, which arranged the deal as independent broker and investment and risk adviser to the trustees.
"The uniqueness of the buy-in solution offered by Rothesay Life is that assets remain in the scheme and can be used to secure alternative protection in the unlikely event of the insurer defaulting," said Andrew Ward, principal at Mercer. "This collateral is recalculated on a daily basis with regular monitoring by an independent collateral manager."
Ward added that reducing risk had been the focus throughout the process.
The collateral will be invested in a portfolio of corporate bonds from which the returns will be paid to Rothesay Life, Mercer said.
The buy-in approach ensured that the scheme would continue to be underpinned by the strong CDC covenant, the consultancy said.
The trustees, together with their advisers, had followed a lengthy selection process, said Nicholas Selby, chairman of the trustees. They were attracted by the "innovative, secure solution" proposed by Rothesay Life, he said.
"The arrangement negotiated by Mercer meets our objectives of removing the key risks of investment and longevity, insuring our liabilities with a major player in the sector and obtaining collateral," said Selby.
Sackers provided legal advice on the deal and Watson Wyatt acted as scheme actuary.