In the UK, home improvement firm Kingfisher’s pension provision comprises a closed final salary section, with 28,000 deferred and pensioner members, and an open money purchase section, with 70,000 active and deferred members.
The firm, which includes brands such as B&Q, Castorama, Brico Dépôt, Screwfix, TradePoint and Koçtaş, employs 82,000 members of staff in total. Its scheme is governed by a trustee board formed from independent, member-nominated and employer-nominated trustee directors. Most trustees are current or former employees, and have a long-term funding objective for the final salary section, which is to be fully-funded on a self-sufficiency basis by 2030.
The majority of the portfolio is invested in assets that match the scheme’s liabilities, including gilts, corporate bonds and bulk annuities. In July 2021, the trustee decided to further de-risk the scheme by completing a third bulk annuity purchase, following ones completed in 2015 and 2018.
The £900 million transaction was completed with Aviva Life and Pensions UK, and covered 8,000 pensioner members, explains James Chemirmir, pensions director at Kingfisher.
“The trustees conducted a robust process of selecting an insurer and negotiating terms,” he explains. “They were assisted by Aon, while receiving actuarial advice from Hymans Roberston and legal advice from Eversheds Sutherland International. They were supported throughout the process by the group pensions executive team and worked collaboratively with the employer throughout the project.”
The decision to carry this out was made by the trustees as they wanted to further de-risk the scheme. The bulk annuity provided an exact match for the pensioner liabilities it addressed, particularly for removing the longevity risk associated with those members.
In addition, the first half of 2021 saw a modest level of activity in the bulk annuity market, which gave the trustee the opportunity to move quickly and take advantage of good market pricing, Chemirmir adds.
“The bulk annuity is an insurance policy that is part of the scheme’s overall total assets. As it removes longevity, investment and inflation risk, it helps provide greater security of benefits for members,” he concludes.