Whitbread Group Pension Fund completes £680m buyout with Standard Life | New

Hospitality giant Whitbread Group has agreed a £680m (€805m) block purchase annuity (BPA) covering around 8,000 members of its pension fund with Standard Life.

The transaction is the first of the trustees of the Whitbread Pension Fund, with the aim of “significantly reducing the risks associated with the members’ underlying benefits”.

Keith Jones, Chairman of Whitbread Pension Trustees, said: “Joining is a key step in the [pension fund’s] risk-free journey. It helps to provide members with greater certainty of the security of their benefits and we are delighted to have completed it with Standard Life.

Kieran Mistry, Senior Director of Business Development at Standard Life, said: “It is exciting to support the [Whitbread trustees] in securing their first buy-in, removing risk in a volatile economic environment. »

He added: “For plans that have yet to reach buyout, retiree buyouts continue to offer a fantastic opportunity to lock in risk over time and form strategic partnerships with insurers along the way. .”

Standard Life has been pursuing a BPA acquisition strategy for some time. At the start of the year, it concluded a £1.8bn EPS covering around 6,600 retired members of the Imperial Tobacco Pension Fund, which is sponsored by Imperial Brands Plc, shortly before closing another for £1.7billion with the Gallaher Pension Scheme.

Standard Life’s Mistry explained how the agreements work, not only to benefit the companies involved, but also for broader ESG objectives.

“Under BPA agreements like this, we receive a one-time premium from the scheme and then guarantee that member benefits will be paid in the future,” he told IPE. “This premium is invested in a wide range of assets to ensure that we are able to meet future liabilities. Since member benefits will be paid out over decades, we can afford to take a long-term view in how we invest and allocate illiquid investments. »

He added: “We aim to invest 60% of our illiquid assets in sustainable investments, including in areas such as renewable energy, infrastructure, affordable housing, healthcare and education. In 2021, we have actually reached 67% illiquid in sustainable investments, which equates to £1.3bn This included over £500m in affordable housing, supporting some of the most vulnerable people in society , as well as over £200 million in projects with a positive environmental impact, such as providing renewable electricity, to nearly half a million homes.

Expected buy-in and buy-out market volumes

Separately, Hymans Robertson’s latest survey of insurance companies offering pension buyouts found that market volumes of buyouts and buyouts are expected to be between £10 billion and £12 billion, respectively, in first half of 2022.

The same insurers surveyed by the pensions and financial services consultancy expected redemption and surrender volumes to be close to £25bn in the second half of 2022.

This would bring the total for the whole of 2022 to around £35bn, which would represent an increase of more than 25% on 2021 volumes of £27.7bn, according to the survey.

James Mullins, Head of Risk Transfer at Hymans Robertson, said: “The rapid growth in demand for pension schemes to insure their risks, together with improving pension scheme funding levels, attractive pricing from insurers and new alternative risk transfer options, mean we expect a record year for redemptions and repurchases in 2023. This should exceed the £44bn we saw in 2019. We also expect around £50bn £100,000 per year of redemptions and redemptions on average over the next 10 years plus longevity swaps This means that by the end of 2031, £1,000,000,000 of pension scheme liabilities will have been insured, covering the benefits of 5 million members.”

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Dolores W. Simon