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Rothesay Life in £2.8bn pension buy-in deal with National Grid UK

8th October 2019 - Author: Matt Sheehan

Rothesay Life, the specialist insurer of defined benefit pension schemes, has concluded a £2.8 billion buy-in transaction with the National Grid UK Pension Scheme.

Rothesay Life logoThe deal is expected to provide more certainty for the National Grid UK around the impact of changes in life expectancies.

It also removes financial risks such as interest rate and inflation, with the aim of protecting the future funding of the pension scheme.

For Rothesay Life it is the third large pension deal to be announced within the last two weeks, having recently agreed to a record £4.7 billion buy-out with telent and a £3.8 billion buy-in with Allied Domecq.

As part of the latest deal, the insurer has committed to reimbursing the Trustee for all pension benefits payable to applicable pensioners of age 70 or less (including to their spouses) until the death of the last pension beneficiary.

Payments will continue to be administered by National Grid UK Pensions Operations and there will be no impact on the members covered by this arrangement.

The National Grid UK Pension Scheme is a UK defined benefit (DB) pension scheme, responsible for around £20 billion of assets under management.

It has around 100,000 members, mostly from the organisation’s gas transmission and distribution businesses, and is closed to new members.

“We are proud to have been selected by the Trustees to support them in their long term de-risking journey,” said Sammy Cooper-Smith, Business Development at Rothesay Life.

“This was a large and complex transaction; our sophisticated risk management systems allowed us to provide economic certainty to the Trustees ahead of transacting despite volatile market conditions in recent weeks,” he continued.

Nigel Stapleton, Chairman and Trustee, National Grid UK Pension Scheme, also commented: “The Trustees are pleased to have secured a buy-in transaction with Rothesay Life. The buy-in provides greater certainty and assurance about the future costs of providing members’ pensions, and we see this as a positive and prudent way of managing the overall funding and risk of the Scheme.”

“We are very pleased to announce this buy-in transaction,” Andy Agg, Chief Financial Officer, National Grid plc, added. “This is an important step in our long-term strategy to reduce the level of risk within our pension arrangements, and demonstrates our commitment to security for our members.”

During the transaction process, the Trustees were advised by Aon and supported by the Scheme’s in-house team. Sackers provided legal advice, with actuarial support provided by Willis Towers Watson, the Scheme Actuary. Rothesay Life were advised by Allen & Overy.

Mike Edwards, Partner, Aon, stated: “This transaction was a great example of how putting in place a robust process for Trustee decision-making which acknowledges the need for flexibility in the current market can enable schemes to capture the best transaction opportunities.”

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