By Simon Jessop
LONDON (Reuters) - Telecoms firm Telent and insurer Rothesay Life have agreed Britain's biggest ever pension transfer deal, covering 4.7 billion pounds in a move that Telent said would secure future payments to 39,000 members.
Companies are increasingly keen to shift pension scheme liabilities off their balance sheet to insurers like Rothesay via deals known as buy-ins and buy-outs, although many, like Telent, have had to wait until their schemes were better funded.
The deal will ultimately see Rothesay take on responsibility for paying the pensions to around 28,000 retirees and around 11,000 members of the GEC 1972 Plan still working, many hired by Telent's previous incarnations GEC and Marconi.
"The Trustee... has done a fantastic job to eliminate the significant funding deficit that existed in the Plan only 10 years ago and get the scheme to a position where it can benefit from the hugely more secure future that this transaction provides," Telent Chief Financial Officer Heather Green said.
The deal is structured in two parts. The first, a so-called 'buy-in', sees the assets of the scheme transferred to Rothesay, which in turn provides the funds for Telent to pay the pensions.
A second stage, the 'buy-out', will see Rothesay take on responsibility for paying the pensions direct. This is set to complete by 2022.
The deal is material for Rothesay, growing its assets under management by more than 10% from its current 42 billion pounds. It currently insures pensions for 770,000 individuals and pays out 1.9 billion pounds in benefits each year.
"When compared to the much smaller Telent the transfer to Rothesay Life will substantially improve the security of members' pension entitlements," Telent said in a statement.
The security provided by Rothesay to potential customers was at the heart of a surprise court decision to block the transfer of 12 billion pounds in annuities from Prudential (LON:PRU) in August. A decision on whether to appeal is imminent.
While Sammy Cooper-Smith, Business Development at Rothesay Life, declined to confirm whether the appeal would be lodged, he said the deal with Telent would give further confidence to other big schemes that a deal was achievable.
Cooper-Smith said schemes with a combined 40 billion pounds of liabilities were currently in the market asking for quotes, although there was no guarantee deals would be struck.
Other insurers active in the market include Legal & General and Pension Insurance Corporation.