(May 20, 2013) — Pension Insurance Corporation (PIC) has negotiated a £63 million pensioner buy-in with the National Society for the Prevention of Cruelty to Children (NSPCC) charity.
The deal helps the scheme to offload the risks with the pensioner cohort, including longevity and inflation.
Under the arrangement, the deflation costs will not be assumed by PIC but instead will held by the scheme, helping to keep the buy-in premium cost down. The trustees are able to buy deflation protection, if they so wish.
David Collinson, co-head of business origination at Pension Insurance Corporation, said in a statement: “We are very pleased to have been able to help the trustees achieve their goals of insuring the pensioner benefits, whilst leaving aside deflation risk. We see many schemes which would like to insure some or all of their liabilities, but are unable to afford to do so.
“By shaping the risks which are insured in this way, we are able to make the product more affordable, while removing the biggest risks, such as longevity, inflation and investment.”
Steve Delo of PAN Governance and independent chair of trustees for the charity, said working with PIC and the trustees’ consultant JLT had enabled the scheme to make considerable savings on the premium for the buy-in.
Interestingly, the charity is chaired by City-grandee Mark Wood, who is also chairman of JLT Benefit Solutions.
The buy-in is the latest stage in the attempt to derisk the NSPCC’s final-salary pension scheme, which was closed to new entrants in 2009.
Last March, its valuation showed the organisation had a £5.5 million pension deficit, with its £160.7 million of liabilities outweighing its £155.2 million assets.
Pension liabilities have been causing havoc for the UK’s charities over the past few years. They have soared thanks to the combined effects of rock-bottom interest rates, lower than expected investment returns, longer lifespans, and quantitative easing.
Barnado’s — another children’s charity — was forced to close its final salary scheme to all members last year, having run up an £83.9 million pension deficit by March 2012.
Likewise, Age UK (formerly Age Concern and Help the Aged) had been forced to use a significant proportion of its charitable income to fund its scheme deficit in 2010. The final salary scheme for its Swindon branch had already fallen into the Pension Protection Fund, and its Slough branch was hit by a one-off £153,000 single payment, triggered by the local charity making its last defined benefit member redundant under pension debt regulations.
The Telegraph estimates the collective pension deficits for Britain’s charities has reached more than £1 billion.
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