Cookson Group Completes Buy In With Pension Insurance Corporation
19 July 2012 (PLANSPONSOREurope.com) - Materials science company Cookson Group has announced that the Trustee of the Cookson Group Pension Plan has signed a pension insurance buy-in agreement with pension insurance solutions provider Pension Insurance Corporation.
The transaction covers the UK plan's pensioner liabilities, approximately 60% of the total liabilities, with an insurance premium of circa £320m met from existing assets of the UK plan.
Mike Butterworth, Group Finance Director of Cookson Group plc, said: "Following the successful conclusion of an enhanced transfer value offer earlier this year, which reduced significantly the UK Plan's deferred member liabilities, this buy-in represents a further demonstration of the Company's intention to work with the Trustee to de-risk the UK Plan in a managed way. The buy-in, which covers some 60% of the UK Plan's total liabilities, will help reduce the level of volatility in future funding costs to which the Company is exposed as the sponsor of the UK Plan."
Allan Course, Chairman of the Trustee, said: "The Trustee has completed a pensioner buy-in following consultation with Cookson Group plc and with advice from Aon Hewitt. The buy-in means that the UK Plan is now fully protected against interest rate, inflation and longevity risks in relation to a significant proportion of its liabilities. This provides an additional level of security for members. We are delighted with the flexibility and responsiveness of the PIC team, as well as the support provided by Aon Hewitt and our other advisers, in bringing the transaction to a successful conclusion."
Jay Shah, co-Head of Business Origination, Pension Corporation, said: "We are very pleased to have been able to help Cookson achieve their de-risking goals. Whilst pension scheme funding levels have generally been impacted by poor equity markets and low interest rates, the large number of pensioner buy-ins completed recently have been driven by the increase in value of Gilts and bonds, allowing those schemes whose liabilities are at least partly matched with these assets to insure significant levels of risk. This allows the company sponsors and their shareholders to lower their exposure to future pension scheme funding volatility."
Aon Hewitt advised the Trustee of the Cookson Group Pension Plan on the buy-in.
Paul Belok, principal in Aon Hewitt’s Risk Settlement Group, said: "Aon Hewitt advised the Trustee throughout the process and ran a competitive review of the market to obtain the best terms for the plan. Following the selection of PIC as the preferred provider, we worked closely with the plan's legal and investment advisers to finalise terms, with particular focus on the policy documentation and the transfer of assets to fund the premium.
"After a relatively quiet start to 2012 - following a particularly strong end to 2011 - this is the biggest transaction of the year in the bulk annuity market. We are aware of a reasonable level of activity currently taking place and can expect to see some more sizeable deals by the end of the calendar year. In particular, we are seeing interest from schemes looking to take advantage of the currently attractive bulk annuity pricing relative to gilt yields."