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Philips scheme completes second pension liability buy-in

The Philips Pension Fund has insured a further £300m of pensioner liabilities following on from a £484m buy-in it completed last year.

The latest transaction, secured by Prudential, covers 1,800 of the £3.5bn scheme’s 20,000 pensioner members, reports sister publication Professional Pensions.

The earlier transaction, completed with Rothesay Life, focused on the scheme’s younger pensioners (PP Online, 2 October).

The scheme, which was advised by LCP, said this had left it better prepared to transact the second time round.

Trustee chairman David Jordan said: “With LCP’s help, we have sought to balance our requirement for value-for-money with the insurers’ need for timing certainty. Being well-prepared and having the right governance process in place is key to being able to give this timing certainty.”

The deal is also part of a growing trend of insurers initiating deals with schemes they are familiar with after they have identified assets that provide a good match for their liabilities.

LCP principal Myles Pink, formerly of Rothesay Life, said: “Because the Philips Pension Fund is ready to act quickly, it is one of the ‘go to’ pension schemes for an insurer looking to transact when they have attractive pricing opportunities available.”

He added: “Pension schemes can select blocks of liabilities that best suit different insurer’s investment strategies from time to time.”

Pink also noted that an increasing number of large schemes were choosing to insure blocks of liabilities rather than securing whole pensioner populations.

“Once a pension scheme has executed the first block, it becomes better educated on how the transaction works and a more experienced buyer. That speeds the whole process up and allows schemes to take advantage of pricing opportunities.”

The deal is the fourth written by Prudential this year, after it secured transactions with schemes at ICI (PP Online, 26 March), the Church of England (10 March) and JLT (13 January).

Prudential executive director of UK and offshore Tulsi Naidu said: “We are currently seeing well-established pension schemes opting for large annuity buy-ins as their de-risking route of choice.”

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