Trustees of the Thorn pension fund have completed a landmark £1bn buyout transaction with Pension Insurance Corporation.
The move will secure the full benefits for more than 15,000 fund members of the final salary pension scheme. Member will also receive an uplift to their existing benefits once the wind-up of the fund is completed.
Thorn trustee board chairman and Independent Trustee Services managing director Chris Martin said: "Working with our independent advisers, we invested a great deal of time in assessing the different options for managing the risks within the fund.
"We believe that the company's proposal and the buyout with PIC is an excellent outcome for the fund's members who stand to gain from enhanced security and uplift to their existing benefits."
Pension Corporation chief executive Edmund Truell said: "We are pleased to have concluded this pension insurance deal, the largest ever. Also, we are delighted to be able to insure, as part of the buyout, enhanced benefits to the fund's members.
"Pension Insurance Corporation has a risk-averse asset and liability management approach; this has earned its spurs in these challenging markets and kept us at the forefront of the industry."
Thorn director Andrew Gurnham added: "Thorn is delighted that members' pension benefits have been secured through this insurance agreement and, coupled with increased member entitlements, believes this deal is the best possible outcome for the group's former employees.
"Thorn is also pleased to have removed any uncertainty about its future pension liabilities in the light of current volatile market conditions. The company would like to thank the Trustee board for managing the transaction in a highly professional manner."
Mercer principal and lead broker of the deal Akash Rooprai said the watershed deal showed it was possible to transact even in turbulent markets.
The transaction was arranged by Mercer for a buy-in of the benefits involving a number of insurers with price, security, speed of transaction and execution ability as the trustee's key selection criteria.
During the process, Thorn proposed a buyout with a benefit uplift for members. This proposal was evaluated relative to the buy-in quotes received and it was ultimately clear that the employer's proposal was the best overall for the trustee and members.
Mercer principal and risk management adviser to the trustee Kevin McLaughlin said: "We worked with the trustee to review the available options, including investigating investment and longevity hedging products as alternatives to an insured solution in order to secure the best deal for members.
"Through this buyout, members have obtained additional benefit security and, in due course, will receive an uplift to their existing benefits. It's a good deal for them. The impact for the trustee is to remove considerable future investment and mortality uncertainty from the fund."IFAonline
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