Global retailer Kingfisher Group has agreed a £230-million medically underwritten buy-in for its defined benefit pension plan.
The transaction, which covers 149 specific plan members from the company’s £3-billion pension, was completed by Legal and General, and advised by Aon Hewitt and Hymans Robertson.
It is the largest medically underwritten bulk annuity arrangement to date in Britain.
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“This is another important step for the Kingfisher Pension Scheme on its journey towards a target of self-sufficiency by 2030,” said Clive Gilchrist, chair of the trustee for Kingfisher Pension Scheme. “The annuity provides a further improvement to the financial security of the scheme for all members.”
The transaction incorporated a ‘top slice’ approach, which refers to a bulk-annuity transaction carried out in respect of a smaller number of members representing a larger proportion of the value of the liabilities within a pension plan. According to Legal and General, having additional medical data in respect of these members allows the insurer to form a more robust view on life expectancy and to price the risk with more certainty.
“We believe the growth in the ‘top slicing’ approach is set to continue and, for many schemes, will be the first step on a journey to full buyout,” said Cheryl Agius, head of strategic business, pension risk transfer at Legal and General. “Medically underwritten bulk annuities were traditionally viewed as a solution for smaller schemes and the emergence of ‘top slicing’ helps open up medical underwriting to medium and larger schemes as well.”
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“We continue to see strong demand from U.K. pension trustees and sponsors to make use of bulk annuity solutions, either as part of a gradual exit strategy or on a partial basis as part of a better matched investment strategy,” said John Baines, principal consultant in Aon Hewitt’s risk settlement group and lead advisor on the transaction.
“Greater competition and innovation across the market, such as use of health data, is providing schemes with more opportunities to remove risk at affordable prices.”