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The Actuary The magazine of the Institute & Faculty of Actuaries

Rothesay Life in Mercer-led buyout of Radius Systems Pension Scheme

The trustees of the Radius Systems Pension Scheme, advised by Mercer, have transferred the scheme’s pension obligations to Rothesay Life, with the deal valued at under £100 million. Radius Systems is a manufacturer of pipes and fittings in the UK, supplying the domestic and international markets.

Mercer advised the trustees on the purchase of a pension buy-in during the second half of 2010. The deal gave the trustees flexibility through three options: hold the buy-in as a scheme asset indefinitely, turn the buy-in into a buyout and wind-up the scheme, or transfer the scheme’s pension obligations to Rothesay Life. The third option was taken as it met the key requirement to close off the wind-up as quickly as possible.

Harry Harper, principal at Mercer, advised the trustees on the transaction. He commented: "By undertaking a buy-in as the first stage, the investment, interest rate, inflation and longevity risks were removed from the scheme in 2010 when market conditions generated favourable pricing. Immediate security was provided for members and sponsor. The second part of the transaction - the transfer to Rothesay Life - took place in March 2011 and cut short what would otherwise have been a much longer wind-up process. It gave certainty on costs at a much earlier point. The period from the purchase of the buy-in through to complete discharge of the scheme’s pension obligations was very short at only seven months."

Robin Freeman, chair of the trustees, said: "This is an excellent result for the scheme’s beneficiaries as it provides immediate certainty of benefits. In addition, as part of the deal, it was possible to be prescriptive on future discretionary pension increases, therefore making this part of the benefits certain at a time when market conditions were favorable. The trustees were supported by sound, proactive advice throughout this two-part project, and this built on the 20-year relationship between the trustees and Mercer".