UK - The £337m ($523.8m) Next Group Pension Plan has undertaken a £124m buy-in deal for the defined benefit section of the scheme, half year results reveal.
The agreement, struck with an unnamed insurance company, was completed on 2 August this year. Under the terms of the arrangement, the plan paid £124m to the insurance firm and will in return receive annuity payments equal to the monthly pensions currently in payment.
As a result, the scheme's exposure to the interest, inflation and longevity risks associated with these pensioner members will be eliminated.
However, because the income stream from the annuity payments will be less than the cash cost of the buy-in, the transaction will reduce the reported assets of the scheme by about £15m.
In order to mitigate this reduction and facilitate the buy-in transaction, on 16 August the company paid a contribution of £40m to the scheme.
Next said the buy-in will have no impact on the reported profits of the group for the year to January 2011, or the liabilities of the plan as calculated under IAS19.
Next was unavailable for comment at the time of writing.
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