Pension Insurance Corporation (PIC) has entered into an agreement with Alliance Boots to insure the Alliance Unichem UK group pension scheme. The buyout means that PIC now looks after the pensions of 3,000 members.
It’s becoming a very popular transaction amongst UK companies looking to offload their future pension liabilities. It allows them to cap their liabilities and makes longevity payments predictable. Longevity risk transfer is a sector that is growing rapidly and involves transactions using buyouts and longevity swaps/hedges.
David Collinson, head of origination at PIC said: “I am delighted that we were able to help the trustees and sponsor of the pension fund bring safety and security to member benefits. We were impressed by the high quality of advisers, including Towers Watson as advisers to the sponsor, and Mercer as advisers to the trustees. This was a complex transaction in which PIC was able to make use of the unusual conditions in the gilt and swap markets to provide the client with a very compelling price that was able to be effected through a single insurance contract guaranteeing the members’ pensions. Having had discussions with other pension funds along similar lines, we expect to see more of this type of transaction.”
This was the smaller of Alliance Boots group pension schemes and there are rumours that they may attempt a similar transaction with their larger scheme in the future.