The £30m transaction completed on 1 November and covers the benefits of more than 280 members of the charity pension scheme.
A PPF assessment period had begun in December 2015 following the insolvency of John Townsend Trust, which provided education and care for deaf children and young people.
The policy is expected to convert to buyout next year and was aided by the sale of school buildings to Kent County Council.
Open Trustees acted as the trustee for the scheme during this period, with managing director Jonathan Hazlett stating he was delighted with the outcome.
“The insurance market is extremely busy at the current time and it can be very challenging to secure member benefits for smaller schemes,” he said. “Notwithstanding this, L&G offered us the opportunity to ensure that scheme members receive benefits greater than what they would have received from the PPF.”
He said getting to the buyout point and negotiating the insolvency had been a “long process”, but added: “While the PPF provides a valuable safety net and a significant level of protection, many members will now receive higher benefits than they might otherwise have expected had the scheme entered the PPF.”
This is the 17th deal announced by L&G so far this year, with at least £4bn of buy-ins, buyouts and assured payment policies (APPs) confirmed. Its deals range in size between an £8m buy-in with the Londis Pension Scheme to a £925m APP with its own scheme.
L&G Retirement Institutional director Adrian Somerfield commented: “Being able to help pension schemes whose sponsors have become insolvent is extremely rewarding and we are delighted to have helped the trustees secure a transaction which provides long-term security to the scheme’s members. This transaction is a great demonstration of how we can assist pension schemes exit PPF assessment and move to buyout with an insurance company.”
Open Trustees was advised by Barnett Waddingham and Gowling WLG. Barnett Waddingham principal Simon Bramwell added: “Getting the best possible result for members has been at the forefront of this project and it’s a testament to the efforts of Open Trustees and L&G that we’ve achieved a fantastic outcome for a small buy-in in a very busy marketplace.
“The key to getting transactions like this done is clear: it’s about thorough and comprehensive preparation. This isn’t necessarily quick or simple to accomplish, but the preparatory work done by the scheme has been incredibly beneficial in achieving the buy-in efficiently and in a manner that has maximised member outcomes.”
The increasingly busy bulk annuity market comes against a backdrop of a heightened number of schemes targeting buyout as their endgame.
Aon’s Global Pension Risk Survey, published yesterday (1 November), revealed that 47% of schemes were aiming for the insurance option, as opposed to 34% looking at self-sufficiency. This is the first time the survey has found buyout to be ahead.
Around two-thirds of those schemes expected to reach their long-term target within ten years, with the average timescale estimated to be 8.8 years.
Aon partner and head of UK retirement policy Matthew Arends said: “The Covid-19 pandemic created challenges for schemes and their sponsors, with many choosing to reassess the risks they faced.
“However, since the initial market reaction, pension scheme funding levels have recovered and many schemes are in a better place than at the start of 2020. As schemes have seen improvements in funding positions, lower-risk targets now seem more achievable.
“In a trend tracked over the last eight years, this survey has seen the number of schemes targeting buyout more than doubling, to a point where now it has become the single leading long-term target for UK defined benefit pension schemes.”
Credit: Source link
