Post Office Limited secures £450m bulk annuity transaction with Rothesay Life

Written by Talya Misiri

The Post Office Limited Section of the Royal Mail Pension Plan has secured its defined benefit liabilities through a £450m bulk annuity transaction with Rothesay Life.

The transaction will cover the pension benefits accrued after 2012 for around 5,700 scheme members, while the benefits that were accrued up to 2012 were paid by the UK government.

The insured benefits are mainly for those still in the workforce and are linked to the Consumer Prices Index before and after retirement.

To select an appropriate insurer and negotiate the terms of the deal, the trustee was advised by Lane Clark and Peacock, Sacker & Partners and ARC Pensions Law. Post Office Limited also received advice from Slaughter and May, and Rothesay Life by Gowling WLG.

Royal Mail Pension Plan independent chair Joanna Matthews said: “This is an important step in improving the security of Post Office workers’ pension benefits. We carefully considered the available options before running a process to select Rothesay Life and implement a bulk annuity transaction. It is through the collaboration of all parties that we were able to lock into this opportunity quickly and achieve an excellent outcome for the Post Office Limited Section.”

Rothesay Life co-head of business development Guy Freeman commented: “We are delighted that Rothesay Life is insuring the pension benefits of the Post Office workers following a well-run process. This comprehensive transaction illustrates Rothesay Life’s strength in removing the complex, long- dated risks associated with deferred pensioners. Corporate appetite to remove pension liabilities has been growing over the past couple of years and shows signs of accelerating in 2018.”

LCP partner and lead adviser to the trustee Charlie Finch added: “Insurers were engaged early in the process, which meant the Trustee was well prepared and could move quickly to take advantage of an attractive pricing opportunity when it arrived. This is a good example of a Trustee, with sponsor support, acting decisively to remove pension liability risk in the Post Office Limited Section.”

Bulk annuity deals are expected to hit a record £15bn in 2018, with at least five deals to surpass the £1bn mark, significantly above 2017’s largest deal of £750m, driven by attractive pricing for buy-ins and a strong year for longevity hedging, Willis Towers Watson reported.

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