The Pension Insurance Corporation (PIC) has closed a partial buyout deal with the pension scheme of GKN, a British aerospace and automotive technology business.
The GKN Group Pension Scheme paid a £190 million ($235 million) premium as part of the transaction, which transfers responsibility for a portion of its pensioners to PIC.
Mercer, strategic adviser and insurance broker for GKN, and Cardano, GKN’s investment advisor, advised on the transaction.
“This transaction marks an important step in the Trustee’s long-term strategy to reduce risk as and when opportunities arise, whilst protecting the benefits of its members,” said Rufus Ogilvie Smals, chairman of the GKN pension’s board of trustees. "A further 20% of the liabilities of the original Scheme are now insured.”
The buyout “reduces risk while ensuring pensioner benefits remain unchanged,” PIC said.
“The Trustee has moved proactively and in a considered manner to achieve a strong outcome,” said Matt Richards, Actuary at PIC. “This transaction is part of a long-term de-risking strategy undertaken by the Trustee which allowed them to take advantage of a window of favorable pricing. The Trustee should be congratulated for acting in a decisive manner to reduce risk across all pensions, not just those that have been insured.”
Certain pension holders will become PIC policyholders as part of the risk-transfer deal, while others will be transferred to a new GKN pension scheme.
“Mercer commends the Trustee on its strategy to manage its pension obligations in an innovative way,” said David Ellis, the Mercer UK leader for Bulk Pensions Insurance Advisory and trustee adviser. “This latest transaction is testament to the long-lasting benefit of taking proactive action to manage pension risk.”