Insurer Royal & SunAlliance yesterday said it had removed all the remaining risk from £1.9bn of pension liabilities in the biggest pension buy-out deal yet seen in Britain.
The company has done a deal with Goldman Sachs subsidiary Rothesay Life, which will see the latter taking over management of the liabilities in return for an undisclosed premium. Rothesay had previously done a similar, but smaller deal, with Rank, the gaming company.
Yesterday's deal covers 55 per cent of the remaining members of RSA's final-salary pension scheme, which is closed to new members and has been substantially "de-risked" in recent years through the sale of equities and the downgrading of the benefits offered to staff.
RSA chief executive Andy Haste welcomed the deal yesterday, and said: "We are pleased to have worked with the Trustees to deliver a strong solution which takes advantage of market conditions.
"Following the action taken in previous years, the schemes were strongly positioned to achieve this next step with such solid security. This transaction further de-risks the impact of the UK pension schemes on the group's results and balance sheet."
Increasing numbers of companies have been closing schemes and downgrading what they offer as they grapple with huge funding deficits and rapidly rising costs.
According to the Pension Protection Fund, a government-created pension lifeboat, the shortfall in UK salary pension schemes widened from £196.8bn in May to £215.8bn in June.
The deal was achieved by Goldman and RSA carrying out an asset swap. This saw RSA handing over a package of short-dated gilts. In return it received a package of higher-yielding similar assets with a longer maturity.
The increased returns from these bonds was used to part pay for the insurance policy. The insurer said there would be no risk to pensioners' benefits from the transaction and will look to do similar deals to cover the remainder of the scheme.Reuse content