The trustees of the Cancer Research UK Pension Scheme have signed a £250m pensioner buy-in with Canada Life, bringing the insurer into the mid-range de-risking market.
The buy-in was funded using the scheme's assets, primarily its gilt holdings, and will protect against risks associated with investments and longevity. The scheme is said to have taken advantage of "attractive pricing" to improve its funding position.
The deal will insure the scheme's 1,355 pensioners and dependant pensioners, which represent a third of the scheme's total obligations.
The buy-in is Canada Life's fourth deal and its biggest to date, significantly surpassing its £35m buy-in with AG Barr last September.
It signals Canada Life, which entered the buy-in market in 2015, may be moving to compete with other mid-range insurers, such as Legal & General, Pension Insurance Corporation, and Scottish Widows.
The agreement also follows the Cancer Research scheme reducing its equity exposure in 2014, and then increasing its holdings in assets moving in line with its pension obligations. It then undertook similar action early last year.
As of 31 March 2016, the scheme reported a surplus of £62m on the FRS 102 accounting measure, with £607m of assets and £545m of liabilities. At the time, £122m of its assets were in liability-driven investments.
However, its latest triennial valuation, dated 31 March 2015, reported a £55m actuarial deficit, resulting in the charity agreeing £5m of annual contributions for 2015 to 2018.
The deal was advised by Lane Clark and Peacock (LCP), Sacker and Partners, and KPMG.
Trustee board chairman Graham Parrott said the deal was executed at a good time.
"We are delighted to have worked in close partnership with our sponsor to complete this well-timed and efficiently executed buy-in as part of our de-risking programme," he said. "The transaction benefits both our members and our sponsor."
Cancer Research UK chief financial officer Ian Kenyon added the reduced burden would allow the charity to invest further in its research.
"We are pleased to secure a transaction that both improves the funding position of the pension scheme and reduces the risk of contributions needing to increase in the future," he said. "This is another action which serves to reduce the charity's base cost to concentrate spending on research."
LCP de-risking team partner Kenneth Hardman said Canada Life's move adds competition to the market.
"With this transaction, Canada Life has established itself within the market for mid-range buy-ins," he said. "This adds further competition to this part of the market and provides extra insurer capacity to pension schemes looking to de-risk through buy-ins and buyouts."
KPMG head of pensions insurance Tom Seecharan added: "This fantastic result both removes risk and improves the funding position in the scheme, which can only be a good thing in the fight against cancer."
The announcement came as Aon Hewitt's latest Risk Settlement Bulletin revealed 2017 has begun with favourable annuity pricing, making buyouts much more affordable and attractive.
The bulletin added "the expected time until full buyout is affordable is not as many years as previously feared."
The Smiths Industries Pension Scheme has secured a £146m buy-in with Canada Life in its fourth bulk annuity and its sponsor’s tenth overall.
The Prudential Staff Pension Scheme has entered into a £3.7bn longevity swap with Pacific Life Re, insuring the longevity risk of over 20,000 pensioners.
The Baker Hughes (UK) Pension Plan has secured approximately £100m of liabilities through a buy-in with Just Group.
There have now been a total of 30 longevity swaps over £1bn publicly announced. The full list, provided by Willis Towers Watson and through PP research, is as follows...
The Reckitt Benckiser Pension Fund has secured a £415m buy-in with Scottish Widows, insuring the benefits of around half of pensioners.