DB pension scheme looking to move to "regulated insurance company"

MrMcTavish

I quote from a recent mailout from the Philips Pension Fund:

"Philips UK and the trustees are actively investigating a significant step to insure the Fund's benefits with a regulated insurance company."

Good or bad ?

greenglide

Is it connected with this http://pensionsworld.co.uk/pw/article/philips-pension-fund-enters-into-a-%C2%A3300m-buy-in-with-prudential-12333311 from last year?

jamesd

If they are insuring the benefits it's so-so but mostly irrelevant for scheme members because the employer keeps the liability to pay. The insurance is in effect an investment by the pension scheme in whatever rates they can get today for future payment obligations. When annuity rates are low this will be expensive, when high, cheap.

If they were selling the obligation to pay the benefits and disposing of the employer obligation that would be a different thing. Insurance sort of does this but the employer is still there as the fallback option.

TrickyDicky101

It's to fix their obligations at today's prices (in effect) so that they are not detrimentally impacted by further changes in market or longevity risk.

agarnett

greenglide wrote: »

Is it connected with this http://pensionsworld.co.uk/pw/article/philips-pension-fund-enters-into-a-%C2%A3300m-buy-in-with-prudential-12333311 from last year?

Readers will note a reference to a previous deal of the same type with Rothesay Life. Goldman Sachs created it (Rothesay) for the purpose (in effect - what actual effect?) of swapping a risk you know and understand for one you don't, because the man down the pub said it was a good idea and he could sort it?

jamesd

agarnett wrote: »

Readers will note a reference to a previous deal of the same type with Rothesay Life. Goldman Sachs created it (Rothesay) for the purpose

The previous deal as in 2013. Rothesay Life was founded in 2007 and says that its first transaction was Rank buy-out.

agarnett

Sorry jamesd, it crossed my mind someone might read it that way and I thought I'd altered it sufficiently.

I meant Rothesay Life was created for the purpose of these novel "de-risking" pitches to stressed DB pension schemes. (It ain't a proper life insurer, now is it?)

It's the usual smoke and mirrors Goldman Sachs style, but once an idea like that floats someone's boat, then others are bound to try to get some of the action.

jamesd

It is a proper life insurer if it's doing this business. last I knew GS was selling and had already cut their ownership to something under 40%. Too much regulation for their taste was effectively the reason given for them selling.

agarnett

A couple of months ago I linked to a telling image on their website - it was of an open carabiner with the ropes it was protecting under strain.

I sometimes wonder if GS types have field days devising new metaphors from risk protections employed in sophisticated sports before they devise new products to fit those metaphors!

They have dumped that particular website now and with it, dumped the dodgy carabiner imagery, but to give you a clue, it was a bit like a close crop of the main carabiner in the foreground of this picture, except it was open and unlocked!

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