Technology and telecommunications organisation Telent has agreed a bulk annuity buy-out transaction with specialist insurance firm Rothesay Life.
The two-part transaction, which will consist of both a buy-in and buy-out process, aims to secure the pension benefits and existing benefit terms and conditions for approximately 39,000 members within Telent’s defined benefit (DB) pension scheme, the GEC 1972 Plan.
The scheme, which has assets and liabilities amounting to an estimated £4.7 billion, has around 28,000 pensioner members and 11,000 deferred pensioner members.
The first part of the transaction, the buy-in, will see the assets of the current pension scheme transferred to Rothesay Life in return for an insurance policy; this will provide the funds for the DB scheme’s existing administrator, so that members’ benefits can continue to be paid in full.
The buy-out phase will see pensioners receive individual pension contracts or annuities with Rothesay Life; at this point, the insurer will take responsibility for members’ pension benefits.
All of the current terms and conditions pertaining to the GEC 172 Plan will be replicated for both in pension and deferred members, including annual increases and flexibilities, such as allowing members to retire early or take cash lump sums.
Telent expects the buy-out to be completed by the end of 2022; the transaction will be the largest full scheme buy-out undertaken in the UK.
Professional services business Aon and law firm CMS advised the pension scheme trustee board on the details of the transaction, while Rothesay Life received advice from Gowling WLG.
Heather Green, chief financial officer at Telent, said; “The trustee of the GEC 1972 Plan 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. It is great news for all members of the scheme. I would like to pay tribute to all the current and former trustee directors and members of the in-house team who have worked so hard to get the scheme into this enviable position.
“For Telent, being the sponsor of a scheme many times larger than our business was not ideal. We can now look forward to focusing more of our investment in our already successful technology solutions business.”
Brian Duffin, chairman of the trustee board, added: “During its history, from its foundation up to this announcement, the GEC Plan has met its commitments to its members despite many changes and challenges. Over five years ago the trustee decided that the best way to provide maximum security for our members in the long term would be to achieve buy-out. Thanks to support from our sponsor Telent, and to an innovative investment strategy based on credit assets, we are now close to achieving our target.
“Our negotiations with Rothesay Life have been professional and constructive, and we will be working closely with them to take the final step to implement buy-out. We believe our members will receive good service from Rothesay Life in future as well as optimal security in the payment of their benefit entitlements.”