The Marks and Spencer’s pension plan has moved nearly $2 billion of its pension liabilities to insurers Aviva and Phoenix.
With the £1.4 billion debt sale, the British retailer is following the trend of companies looking to de-risk as economists and institutional investors continue to project warnings of an economic downturn in the near future. The company currently has about £9 billion in liabilities, according to its latest triennial valuation. The pensions being transferred are calculated according to employees’ final salaries to the insurers.
By using economies of scale and investing while using actuarial expertise to match assets closer to liabilities, the insurance providers can run the pensions and life policies at a cheaper rate, Reuters reports.
In its biggest bulk-annuity deal to date, Aviva recently bought out £925 million of the British retail company’s defined benefit pension liabilities, says the news service. Phoenix recently closed its first bulk-annuity deal at £470 million.
The two insurers have set up plans that allow them to tackle more of Marks and Spencer’s debt if needed, according to Reuters.