Jardine Lloyd Thompson Group has announced the completion of a further £85m buy-in contract with Prudential for the JLT UK Group Pension Scheme. The Defined Benefit (DB) section of the JLT UK Group Pension scheme has c4,000 members and assets of c£500m. The scheme was closed to future accrual in 2006.
This contract covers part of the pensioner liabilities in the DB section and follows an earlier buy-in transaction for £120m of pensioner liabilities concluded with Prudential in October 2013.
The structure of this ‘buy-in' has enabled the Company and Trustees to secure liabilities at a very competitive price. Trigger prices were set for tranches of the scheme's liabilities and Prudential acquired assets to meet these triggers and complete the transaction. These buy-in contracts are expected to reduce the volatility of the scheme’s future funding requirements.
The structure of this buy-in approach provides a number of benefits to Trustees in managing pension scheme liability risk:
• enables better pricing, thus making buy-ins/buy-outs more affordable;
• enables market pricing opportunities to be seized, so that trustees can move quickly to capitalise on opportunities to secure liabilities;
• simplifies the disinvestment process by securing liabilities in tranches;
• increases the efficiency of the legal process, through a standardised contractual approach;
• allows schemes to select the counterparty they want to deal with upfront; and
• provides insurers with added confidence that the transaction is likely to be successful, enabling them to focus their resources to achieve a successful outcome.
Martyn Phillips, Head of Buyouts, JLT Employee Benefits, commented: "The trigger price mechanism has enabled us to achieve demanding price targets for the JLT UK Group Pension Scheme for this £85m pensioner buy-in contract, and for the £120m pensioner buy-in concluded for the scheme in October 2013. These transactions demonstrate the benefits of proactively engaging in a well-designed de-risking process and with an insurer of Prudential’s expertise to significantly reduce risk in the scheme."
Mike Reynolds, Group Finance Director, Jardine Lloyd Thompson Group plc, said: “We are very pleased to complete this further transaction to secure pension scheme liabilities. The Trustees of the JLT UK Group Pension Scheme have continued to work closely with our Employee Benefits business and Prudential with an innovative solution to facilitate buy-in transactions as part of JLT’s long term plan to pro-actively manage its balance sheet.”
Aki Hussain, Chief Financial Officer, Prudential UK & Europe, said: “Prudential is leading the way in scheme de-risking with an innovative approach to segmenting liabilities. We anticipated that the introduction of this fresh, segmented approach to de-risking would prove attractive and create new opportunities for schemes to transact, and we have not been disappointed with the response from trustees. We fully expect the momentum created to carry on through 2014.”
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