The £25m medically underwritten buy-in covers just 35 members, with higher annual pension incomes, who represent a significant concentration of longevity risk – given the scheme has around 3,500 members in total.
Under the terms of the buy-in, Just Retirement secures a quarter of the scheme’s pensioner liabilities by insuring the benefits of the members with the highest liabilities. The insurer’s medical underwriting meant the scheme was able to secure the liabilities at a small discount to their assumed funding valuation after more than 90% of members provided medical information.
“I am very pleased that we were able to support Renold and the trustees in this step of their pension de-risking journey as they secure pension benefits for their scheme members. It is a testament to the quality of their advisers and our team that we were able to execute this ‘top slicing’ deal in a short time frame and provide the client with certainty around the execution of the transaction.” – Tim Coulson, director of DB solutions at JUST.
“We were delighted to be able to help the trustees and company successfully complete another significant de-risking step for the scheme – and achieve such a good outcome for all parties, including the removal of longevity risk for these members. The highly competitive terms achieved, supported by the practical approach of Just Retirement, demonstrated the potential value of medical underwriting for schemes. In our view, top-slicing deals of this nature will become an increasing feature of the market.” – Gavin Markham, head of bulk annuities, Barnett Waddingham.
“Working closely with the company, as part of the overall de-risking strategy for the scheme, the trustees had clear objectives for managing the risks associated with the liabilities for this group of members. Supported effectively by our advisers Barnett Waddingham and Pinsent Masons throughout the process, this buy-in transaction with Just Retirement represents an extremely positive result for all parties associated with the scheme.” Warwick Jones, chairman of trustees, Renold pension scheme.
The company said that attractive pricing terms combined with the medical underwriting process meant the scheme could secure the liabilities at a small discount to their assumed funding valuation.
The transaction has no impact on the funding level of the scheme and did not require any additional contributions from the group. Consideration for the buy-in will be sourced entirely from a portion of the scheme’s index-linked UK government bonds. The group is now fully protected from volatility in longevity, inflation and interest rates in respect of these members.
“The buy-in of 25% of current pensioner liabilities is an important step in de-risking the group’s cash flows and balance sheet from the impact of volatility in pension liabilities. Re-building the group’s balance sheet and closely managing our legacy pension obligations are important aspects of the group’s overall strategic objective to deliver sustainable gains in shareholder value.” – Robert Purcell, chief executive.
Barnett Waddingham advised the scheme on the agreement, for which conversations began in November 2014, and appointed MorganAsh to undertake the medical collection and tender process.
“The company considers this transaction to be an important move in helping to manage its legacy pension obligations and the impact of volatility on its balance sheet. Attractive pricing through the use of medical underwriting allowed us to secure a material proportion of the pensioner liabilities at no additional cost, thanks to the proactive advice and commitment of Barnett Waddingham.” – Brian Tenner, finance director, Renold plc.