The Menzies Pension Fund has entered into a £75m buyout with Pension Insurance Corporation (PIC) through a bespoke deal involving payments in instalments.
An undisclosed number of members of ‘Section B' of the John Menzies scheme, which aligns with the company's distribution division, have been insured despite the scheme not having enough assets to immediately buyout all benefits.
A payment plan has been agreed with PIC to gradually insure all benefits, although the scheme could not reveal over what duration or any further details.
The structure of the deal gives certainty over contributions required from the sponsor, Menzies Distribution Limited, easing the sale of the business to private equity firm Endless LLP, which was announced on 26 July.
The agreement to a payment plan also allowed the scheme to lock-in pricing at an earlier stage and for a lower cost than originally anticipated.
Trustee chairman, professor Ian Percy CBE, said the board was "delighted" to have secured the pricing earlier than expected. He continued: "Hymans Robertson identified an opportunity for the scheme to benefit from attractive market pricing and developed a bespoke solution with PIC that met our objectives of both the trustees and John Menzies."
John Menzies chief financial officer Giles Wilson added: "The buyout with PIC locks down risk today at less than the current funding shortfall, removing exposure to an unpredictable and volatile deficit. The policy has given certainty to the trustees regarding the level of support they require going forward from the sponsor."
Hymans Robertson consulting actuary Kieran Mistry - and lead adviser to the transaction -said the deal was enabled "by looking holistically" at the trustees' and sponsors' objectives.
"PIC's flexibility and collaborative working style allowed us to secure members' benefits for less than the scheme's funding reserves, removing exposure to uncertain future market pricing," he continued. "We believe there are many other pension schemes which would benefit greatly from a similar buyout structure to fully lock down their risks and secure their scheme much earlier than expected."
PIC senior actuary Tristan Walker-Buckton added: "We helped structure a transaction around the client's specific requirements which enabled the scheme to achieve its de-risking goals, providing the sponsor with increased financial certainty and scheme members with greater security."
The deal brings PIC's total disclosed bulk annuity sales for the year to over £4bn, with an almost equal split between buy-ins and buyouts. The insurer today (13 August) also announced an £800m full buyout with the BHS2 Pension Scheme.
Aviva Life & Pensions has concluded an £875m buy-in with its own staff pension scheme, following on from a similar transaction last year.
Just Group has completed a £74m pensioner buy-in with the UK pension scheme of a US-listed engineering business.
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.