Rothesay Life, the specialist insurer of defined benefit pension schemes, has agreed to a £3.8 billion bulk annuity buy-in of the Group Pension Scheme of Asda, the UK supermarket retailer owned by Walmart.
The transaction has been secured in anticipation of a full buy-out of the Scheme, and will be enabled by a one-off final pension contribution from Asda of approximately £800 million.
The parties believe the arrangement will secure the benefits of all 12,300 members in the Scheme, consisting of 4,800 pensioners and 7,500 deferred pensioners.
Asda clarified that the Scheme is separate to the Asda Pension Plan, a defined contribution scheme that provides ongoing pension arrangements to the majority of Asda’s colleagues.
Following buy-in, members of the Scheme will be provided with individual annuity policies issued by Rothesay Life, who will then be responsible for paying members’ benefits in full.
These individual policies will replace the bulk annuity policy and bring about a full scheme buy-out, expected to be completed in late 2020 or early 2021.
Upon completion of the buy-out, Walmart will recognise a pre-tax charge to earnings of approximately $2.2bn, of which $1.2bn relates to non-cash items.
The announcement follows several other large pension deals for Rothesay Life in recent weeks, including a record £4.7 billion buy-out with telent, a £3.8 billion buy-in with Allied Domecq, and a £2.8 billion buy-in with National Grid UK.
“This transaction, with a very well-respected global brand, followed a rigorous selection process,” said Tom Pearce, Managing Director at Rothesay Life. “The Asda trustees chose Rothesay Life because, as an annuity specialist, we were able to address the scheme’s complexities and will provide long-term security and market leading customer service for their pensioners”
“We are seeing an increasing number of very large schemes, with strong corporate sponsors, looking to insure pension liabilities,” Pearce continued. “These sponsors want to provide security for their pensioners so they can focus on their core businesses. This trend has seen Rothesay Life write a record level of pension business in 2019. We now provide a safe home in retirement for over 800,000 people and manage £56bn of assets.”
Roger Burnley, Chief Executive of ASDA, also commented: “This transaction is an excellent outcome for our Scheme members – and for Asda and Walmart. We have supported the Scheme over many decades through significant cash contributions.”
He went on: “That funding, combined with strong stewardship by the Scheme’s trustees, has resulted in the very positive situation where the Scheme can now be transferred to an A+ rated insurance company, Rothesay Life – de-risking the scheme and providing long term, sustainable support for its members.”
“This is great news for members,” added Richard Phillips, Chairman of Trustee. We have had many years of support from Asda and Walmart, and careful management by the Asda pension team with the help of our advisers. Together we have now secured our members’ benefits through Rothesay Life, an insurer which has strong financial credentials and a track record of excellent customer service.”
Richard Mayfield, Executive Vice-President and CFO of Walmart International, further stated: “We are delighted to be able to secure the pensions of our members with a leading, well financed insurer such as Rothesay Life. This transaction is good news for members of the scheme, simplifies the Asda balance sheet and will transfer our pension liabilities at a competitive price.”
The Trustee Board was advised by Aon, Addleshaw Goddard, Cardano and Lincoln Pensions during the transaction process, while Asda was advised by Allen and Overy, PwC and Bath Actuarial Consulting; Walmart by Slaughter and May, PwC and Bath Actuarial Consulting. Rothesay Life was advised by Travers Smith.
“We are very proud to have supported the Trustee in achieving such a high degree of security for their members’ benefits through this buyout,” said Mike Edwards, partner at Aon.
“This was a highly bespoke transaction, not least due to the size of the scheme and the liability profile, achieved against the backdrop of the busiest ever year in the bulk annuity market and an uncertain political environment,” he noted. “The collaborative approach between all stakeholders was crucial to achieving such a successful outcome.”
Ben Stone, head of pensions risk transfer at PwC, also stated: “Securing a deal of this size and complexity in a market that has been so busy in the last few months is a great result for ASDA, Walmart, the trustees and the pension scheme members.”
“We were delighted to support ASDA and Walmart, bringing our buyout market expertise into negotiations and planning, while implementing solutions to ensure the scheme was prepared to transact as quickly as possible,” Stone said. “It shows the importance of a strategic and well-run process, with collaboration between all stakeholders to achieve the desired outcome.”
