Pension Insurance Corporation (PIC), the specialist insurer of defined benefit pension funds, has concluded a £425 million pension buy-in deal with a trust sponsored by the Co-operative Group.
The arrangement provides insurance for £425 million of pension liabilities relating to the Somerfield Pension Scheme, which has a total of around £13 billion of liabilities.
Following the buy-in, the Trustee of the scheme will retain responsibility for paying its members, while PIC will provide regular payments to fund the scheme into the future.
The Somerfield scheme is one of several sponsored by the Co-op, which is among the world’s largest consumer co-ops and owned by millions of members.
The Group is also the UK’s fifth largest food retailer, its number one funeral services provider, a major general insurance business, and a developing legal services business.
This transaction follows an active year for PIC, as it wrote £7.1 billion of new business in 2018 with the trustees of 30 pension schemes.
“This transaction is testament to the long-term de-risking strategy carried out by the Trustee,” said Mitul Magudia, Head of Business Development at PIC.
“PIC and Co-op share a similar philosophy in respect of pensioner welfare and we are delighted to have entered this longterm partnership with the Scheme, and the wider Co-op Group,” he added. “We expect this to be the first of many significant transactions by insurers in 2019.”
Chris Martin, Executive Chairman of Independent Trustee Services Ltd, and Chair of the Trustee, also commented on the deal: “This buy-in is the result of many years of hard work as we pursued a longterm de-risking strategy and I am pleased that the Co-op and Trustee have been able to work together to complete it in what have been volatile market conditions.
“I want to thank the Coop pensions team and our advisers, Aon, for their role throughout the process in scoping and executing the transaction, and Eversheds Sutherland and Mercer, for their advice to the Trustee.”
Martin continued: “The result further increases the security of Scheme members’ benefits. PIC won the transaction based on their ability to complete the transaction in these markets, as well as their overall track record, including a deep-seated commitment to customer care.”
The lead transaction adviser to the Trustee in this deal was Aon, with legal advice provided by Eversheds Sutherland and investment advice by Mercer. PIC was advised by Herbert Smith Freehills.
Tom Scott, Principal Consultant in Aon’s Risk Settlement Group, stated: “The transaction, which leveraged the pre-agreed Pathway contract arrangements developed between Aon and Eversheds Sutherland, represents a tremendous outcome for Scheme members, and the Co-op Group.
“It reflects the vibrant bulk annuity market, but also the preparedness of the Scheme, which is a vital factor in ensuring that insurers focus on a particular transaction over the many other opportunities brought to them. It also gets the 2019 market off and running in what promises to be a record-breaking year.”
