Boots And Coop Offload Workplace Pensions To Insurers

molerat

2 major workplace pensions have been moved to insurers today.  Boots has £4.8bn liabilities and is said to be the biggest single transfer in the UK.  Boots will also be paying another £670M to L&G.

The Coop has liabilities of £4bn and has moved to Rothesay

https://uk.finance.yahoo.com/news/walgreens-unit-boots-transfers-6-160617448.html

https://www.ipe.com/news/co-op-pension-fund-insures-remaining-4bn-of-liabilities/10070254.article

Pat38493

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Ganga

molerat said:

2 major workplace pensions have been moved to insurers today.  Boots has £4.6bn liabilities and is said to be the biggest single transfer in the UK.  Boots will also be giving another £670M to L&G.

The Coop has liabilities of £4bn and has moved to Rothesay

https://www.ft.com/content/b348fe64-c9de-4a88-9c03-a6b1af48e382

Could not access the link without paying a subscription to the newspaper.

coastline

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

EDIT..

The first 10 years under the company there were 3 years with no annual rise. After 10 years the total amount paid had increased by 10% at most. So half the inflation rate. Since then it has been subject to the Barber and GMP rules and increased accordingly.

Pat38493

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

Hmmm.... if it's a DB pension scheme, I would have thought that the rules has to be maintained throughout any buy out.  My DB pension is currently in the process of a buy out and I have letters from them confirming that all my benefits will be maintained exactly as they are today after the buy out, including the increases in payment.

Otherwise surely the trustees would be in breach of their duty to members if they reduce the members pension rights from what is in the rules during a buy out.

Tommyjw

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

Buy-in woulld make no changes to the benefits due to members according to the Rules.

It's not clear if you're saying you used to have higher increases, but if you did what you may have seen was your pension used to be increased by a higher discretionary amount if the sponsor had the funding to do it, but they don't have to. When they went to Buy in they wouldnt have really been able to keep that going so the insurer is just paying what the rules say.

Have to say i'm strugglign to understand though how your pension could be made up if you sometimes get increases, meaning it is wholly or partly an increasing pension element, and simulatneously sometimes have no increase !

Marcon

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

No.

Pat38493 said:

coastline said:

Pat38493 said:

By the way if your DB pension is bought out by an insurer in this way, does it give the members any additional ability to request transparency on how their benefits are calculated (per other recent threads)?

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 15 years on in this DB scheme and it's very disappointing to say the least. Maybe I shouldn't have taken it early but that's the gamble you take. So much for gold plated DB pensions.
Boots was a major scheme which transferred from equities to bonds in 2001 . Most at that time were 50/50% or some even a bit more equity.

Boots investing 100% in bonds – 20 years on - Hymans Robertson

Hmmm.... if it's a DB pension scheme, I would have thought that the rules has to be maintained throughout any buy out.  My DB pension is currently in the process of a buy out and I have letters from them confirming that all my benefits will be maintained exactly as they are today after the buy out, including the increases in payment.

Otherwise surely the trustees would be in breach of their duty to members if they reduce the members pension rights from what is in the rules during a buy out.

Members have the same rights, but discretions are removed (as far as possible) during the final buy out phase, because otherwise the insurers wouldn't know for sure what they were insuring.

xylophone

https://www.pinsentmasons.com/out-law/analysis/pensions-risk-transfer-discretionary-pension-increases

may be  of interest.

Marcon

xylophone said:

https://www.pinsentmasons.com/out-law/analysis/pensions-risk-transfer-discretionary-pension-increases

may be  of interest.

Likely to be rather heavy going for many, so picking out a particularly relevant extract:

Buy-out and discretionary increases

On buy-out, insurers will not provide discretionary increases and will only be prepared to insure guaranteed benefits. Trustees therefore need to have regard to the loss of any future discretionary increases on buy-out. Although relevant for schemes of all benefit types, this is especially important for schemes with no guaranteed increases to any pre-1997 benefits.

If the trustees want to secure increases to pension in payment beyond that which is guaranteed to be provided, this will need to be insured as further guaranteed increases with an additional premium to be paid. Unless there is a surplus and the sponsor agrees for it to be used in this way, the sponsor would need to provide additional funding. Therefore, as part of trustees’ decision to enter into a full buy-in and buy-out, one consideration amongst others will be the impact on discretionary increases.

The trustees’ primary legal obligation is to ensure the security of accrued benefits. The specifics of the scheme and sponsor covenant need to be considered. However, it will generally be right for trustees to prioritise the security of guaranteed benefits over the possibility of future discretionary increases.

Hoenir

coastline said:

Mine has gone from a very well known FTSE company to a very well known insurance company and all they are guaranteeing is a 2% PA increase. Just get's worse by the year. Some years under the company there was little or no rise. 

By guarantee that's a floor presumably, i.e. even if inflation is lower than this your pension will be uplifted by 2%. Inflation has been very low during much of the past decade. Shouldn't come as any great surprise what the annual uplifts have been. What do your old scheme rules say? Many had cap of a 5% uplift. As got badly burnt in the raging inflationary period of the 70's. Likewise what is buy-out policy going to actually provide. 

Pat38493

Marcon said:

xylophone said:

https://www.pinsentmasons.com/out-law/analysis/pensions-risk-transfer-discretionary-pension-increases

may be  of interest.

Likely to be rather heavy going for many, so picking out a particularly relevant extract:

Buy-out and discretionary increases

On buy-out, insurers will not provide discretionary increases and will only be prepared to insure guaranteed benefits. Trustees therefore need to have regard to the loss of any future discretionary increases on buy-out. Although relevant for schemes of all benefit types, this is especially important for schemes with no guaranteed increases to any pre-1997 benefits.

If the trustees want to secure increases to pension in payment beyond that which is guaranteed to be provided, this will need to be insured as further guaranteed increases with an additional premium to be paid. Unless there is a surplus and the sponsor agrees for it to be used in this way, the sponsor would need to provide additional funding. Therefore, as part of trustees’ decision to enter into a full buy-in and buy-out, one consideration amongst others will be the impact on discretionary increases.

The trustees’ primary legal obligation is to ensure the security of accrued benefits. The specifics of the scheme and sponsor covenant need to be considered. However, it will generally be right for trustees to prioritise the security of guaranteed benefits over the possibility of future discretionary increases.

Hi Marcon - ok but if they have sent me a letter setting out a table with the increases set out for different parts of the pension, I would assume that those are not discretionary?

Also on a linked point - if there is a surplus in the fund beyond what the insurer has as their buyout fee, does that surplus go back to the original employer or the members?  I guess this would depend on what it says in the rules - the trustees should ensure that it goes to the members unless the rules say otherwise?