Marks & Spencer has taken a further significant step in reducing the risks in its £11bn UK defined benefit pension scheme through two further buy-in policies with Aviva and Phoenix Life totalling £750m.
Hymans Robertson has been working with Marks & Spencer on the de-risking strategy for the pension scheme, working collaboratively with the Trustee and its advisers.
Combined with buy-in policies purchased in 2018 and 2019, 80% of the Scheme’s pensioner liabilities are now insured through a series of transactions totalling £3.7bn.
The strategic approach to risk management reduces the risk that Marks & Spencer will be required to contribute additional cash to the Scheme in future. This is a further step in the journey to ensuring that all members’ benefits are secured, while the risk to shareholders is carefully managed.
This buy-in marks the Scheme’s third transaction with Phoenix, securing a total of £1.3bn of liabilities, it also increases insurance coverage to around 30% of the Scheme’s total pensioner liabilities. The Trustee approached the market earlier in the year as market volatility presented a favourable pricing opportunity.
Richard Wellard, Partner, Hymans Robertson said: “The Company and the Trustee were able to confidently undertake these transactions, despite the potential disruption from COVID-19, demonstrating that attractive terms can be secured where parties have the right governance and co-operation to act at the required pace.
“This is further evidence of the benefits of the steps undertaken in recent years to establish shared objectives and a collaborative approach to working. Setting a strategy and timing transactions in a way that works for both the Company and the Trustee remains very important.”
Daniel Brook, Group Treasurer, Marks and Spencer commented: “With the support of Hymans Robertson we have successfully completed our third set of buy in transactions, helping us to continue reducing exposure to external factors and further increase the protection of our Scheme members’ benefits.”
Graham Oakley, Chair, Marks and Spencer Pension Trust commented: “We’re pleased to announce the purchase of these additional buy-in policies, providing another important contribution to our ongoing objective of reducing risk in the Scheme to increase the security of all members’ pensions. The collaborative approach and our existing relationships have allowed us to act quickly and complete further well-priced transactions.”
Justin Grainger, Phoenix Group’s Head of Bulk Purchase Annuities, said: “We are delighted to continue to support the Marks and Spencer Pension Scheme on its long term de-risking journey. Today’s announcement builds on a relationship established in 2018 that has now secured £1.3bn of the Scheme’s liabilities. This latest transaction demonstrates how an umbrella contract structure can benefit all parties if trustees are set up to react to favourable pricing opportunities.”