Pension Corporation has announced details of a groundbreaking pension insurance buyout agreement involving the trustees and sponsors of the DENSO Manufacturing UK Pension Scheme and DENSO Marston Pension Scheme and Pension Insurance Corporation.
Pension Corporation has announced details of a 'groundbreaking' pension insurance buyout agreement involving the trustees and sponsors of the DENSO Manufacturing UK Pension Scheme and DENSO Marston Pension Scheme and Pension Insurance Corporation.
The transaction, which covers around £200m of liabilities, relates to accrued pensions and allows members of the schemes to continue accruing future final salary benefits through insurance policies.
According to Pension Corporation, the parent company of PIC, the agreement is the first time that pension funds have entered into a buyout that accommodates future accruals in a way that is analogous to an open defined benefit scheme, but with the added security of the insurance regulatory regime protecting those benefits.
By doing so, the scheme can be wound up and members can continue accruing final salary-linked benefits, it explained.
PIC previously insured three funds of UK subsidiaries of DENSO, which is a global automotive technology supplier, in a 2009 transaction covering liabilities worth over £100m.
Like that deal, the latest agreement will be an 'all risks' pension insurance buyout where PIC assumes all risk - including data verification - on signing of the contract.
Raymond Ainscoe, chairman of the trustees of the DENSO Marston Pension Scheme, said: 'The trustees are pleased that all scheme members will benefit from insurance for past benefits as well as continuing future accruals. The PIC team were reassuring throughout the process, spending three days meeting members of the pension schemes at our facilities.'
Jay Shah, co-head of business origination at PIC added: 'This is the right solution for the company and trustees - we worked closely with them and their advisers to create an innovative structure.
'To allow future accruals, whilst insuring the members' benefits, may provide a lifeline to other pension funds and a possible way forward for other DB schemes whose sponsors will fund future accruals but wish to remove the funding volatility.'
