UK Pensions - PC buys Thorn scheme

After buying UK electrical company Thorn in 2006, Pension Corporation (PC) has organised a buyout of the company's £1 billion pension scheme with its regulated insurance subsidiary PIC.

According to Chris Martin of Independent Trustee Services (ITS), chairman of the scheme trustees, PC offered to wind up the scheme on condition that the trustees accepted PIC's buyout. The trustees were advised by Hewitt, while the bidding process was organised by Mercer.

Martin said the 15,000 member scheme is "very mature" and was de-risked in 2000. By 2008, he said, it "had more assets than were required for a buyout", with 105% coverage. A small position in "risk-seeking assets", mainly equities and hedge funds, was sold last summer.

The deal offered by PIC allowed the surplus to be shared out among members, which the trustees found compelling. "PIC took away all the mortality risk from the scheme, and we managed to get an uplift on benefits," said Martin. The last actuarial valuation for the scheme was conducted in 2006. Given the request by the sponsor to use its captive subsidiary as buyout insurer, Martin says that the trustees conducted additional investigation into the solvency position of PIC.

"Our legal experts did full due diligence. Oliver Wyman analysed the Pillar I and Pillar II Financial Services Authority solvency position of PIC," he said. "We felt we had adequate confidence in the solvency and strength of PIC."