Retailer Shop Direct has completed an £880 million pensioner buy-in transaction for the Littlewoods Pensions Scheme.
The buy-in transaction, completed with Scottish Widows, passes risks associated with approximately 60% of the defined benefit (DB) scheme’s liabilities to the insurer, and provides a monthly income to the trustee in order to meet the pension benefits payable to 7,000 scheme members.
The transaction has also been designed to further improve the pension scheme’s funding position, after its funding position was initially strengthened by hedging its interest rate and inflation exposure. The buy-in will additionally reduce the adverse risks faced by the scheme.
The buy-in transaction is the largest bulk annuity agreement to be completed by Scottish Widows to date.
Lane, Clark and Peacock (LCP) advised the trustee on the planning, structuring and negotiation of the buy-in transaction, Arc Pensions Law gave legal advice to the trustee and Scottish Widows received legal advice from Eversheds Sutherland.
Colin Thwaite, chairman of the trustees for the Littlewoods Pensions Scheme, said: “We are delighted to have completed this buy-in transaction with Scottish Widows, covering well over half of our liabilities. The attractive pricing of this transaction has closed the gap to being fully funded and further reduces the risk profile of our investments to meet members’ pensions.”
Derek Harding, finance director at Shop Direct, added: “We are delighted to have locked in attractive market pricing for the benefit of the members and the employer. The trustee [has] managed the investment strategy very successfully and the scheme remains in a healthy surplus on a prudent self-sufficiency basis.”