The Yell Pension Plan, the UK digital marketing solutions provider’s pension scheme, has completed a full buyout with Pension Insurance Corporation (PIC), a specialist insurer of defined benefit pension funds, covering the £370m (424 million euros) of the plan’s remaining liabilities.
The transaction brings the scheme’s total liabilities covered by PIC to £570 million, it has been announced.
PIC secured an initial buyout of £200million with the plan in 2014, insuring 500 pensioners. This latest transaction was agreed in the expectation that the full plan will switch to buyout when all 1,800 plan members become PIC policyholders.
LCP was the primary transaction advisor to the Plan Trustee and Allen & Overy provided legal advice. PIC was advised by Herbert Smith Freehills.
Chairman of the Trustees John Reeve, of Finsbury Trustee Services Limited, said: “Yell and the Scheme Trustees have worked closely together for many years to improve the scheme’s funding levels and by working with PIC we have been able to take action. quickly to ensure the future of our members. . I would like to thank the directors, past and present, and the sponsoring company for this excellent result for the members. »
Uzma Nazir, head of origination structuring at PIC, said: “The trustees moved quickly to use their improved funding position to secure the remaining uninsured liabilities. Given our existing positive relationship with the plan, they approached us to provide an insurance solution. This transaction helped the trustee reduce plan risk, eliminate risk to the sponsoring company and provide greater security to its members in times of economic uncertainty.
Automatic enrollment: “pass through the net”
With the 10th anniversary of Automatic Enrollment (AE) next month, research by Legal & General Investment Management (LGIM) shows that thousands of people from financially vulnerable groups in the UK could “fall through the cracks”. net”.
The research, which assessed more than 5,000 people in the UK private sector workforce, revealed some worrying statistics, particularly among three cohorts: low-wage workers, young workers and women workers.
The findings shed light on the education gap within pensions and the potential retirement crisis for those currently outside the EI eligibility thresholds. The research was conducted against the backdrop of rising inflation rates and the daily challenges people are facing with the cost of living crisis.
LGIM said there is still a widespread misunderstanding of the rules governing how pensions work, employer contributions, tax savings and EI thresholds, especially among younger workers.
The research found that almost two-thirds (62%) of young workers did not know they could apply to be registered, while more than half (59%) said they were unaware that employers did not wouldn’t have to contribute the first £6,240 of their earnings.
The research also showed that among the cohort of low-wage workers, part of the reason for not contributing was due to a lack of information. For example, 38% of low-wage workers not currently receiving a company pension would have joined their employer’s pension scheme if they had known they had the right to apply, while 38% said that their employer had not explained the eligibility rules for joining their occupational pension scheme.
DB scheme contributions from FTSE 350 companies outweigh their DC schemes
New research from consultancy Barnett Waddingham has found that FTSE350 companies with defined benefit (DB) pension schemes consistently pay more into those schemes than their defined contribution (DC) counterparts.
More than 12 million private sector Britons save in a DC pension scheme, while just under a million are active members of private sector DB schemes.
FTSE350 companies with a DB scheme contributed £14.4bn to these schemes in 2021. Of this, £9.8bn is used to repay past service shortfalls; largely paying the historic promises made to former employees. The remaining £4.6bn relates to DB pension accumulation, ie building up a DB pension for current employees.
The total figure has remained roughly stable over the past decade; in 2012 it was £14.2 billion, with some fluctuation in between, Barnett Waddingham’s research found.
Meanwhile, DC contributions from these companies in 2021 totaled £9.6bn. That figure has risen steadily over the past decade since the introduction of auto-enrollment legislation in 2012, when DC dues stood at £3.7billion. However, it represents only 40% of the total cost of pensions for these companies.
The DB scheme deficit contribution figure for 2021 is slightly skewed by a large one-off contribution from Tesco (£2.5bn), but this continues the trend in previous years of making large one-off contributions to reduce the deficits of the DB scheme.
Simon Taylor, Partner at Barnett Waddingham, said: “The pension contributions for FTSE350 companies with DB schemes provide a stark illustration of the persistent debate over intergenerational equity. Overall, these FTSE350 companies have paid more to cover DB pension plan shortfalls in 2021 than paid to fund current employees’ DC pension savings.
He noted that despite AE’s success, “it is extraordinary that promises made to (usually) former employees continue to represent higher expenses than retirement savings for current staff.”
“Current CD members exist in a different financial reality, with radically different retirement prospects than current DB members. For companies with both DB and DC regimes, they need to consider all of their stakeholders and decide on the fairest and most prudent allocation of resources going forward,” he said.