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LONDON (Alliance News) - Renold PLC Wednesday said its legacy defined benefit pension scheme in the UK has completed a medically-underwritten, insured buy-in that fully de-risks about GBP25 million, or a quarter, of its current pensioner liabilities for the highest-liability pensioner members, a move that also de-risks the company's cash flows and balance sheet.
The industrial chains and related power transmission product supplier said the Renold Pension Scheme was able to secure the liabilities at a small discount to their assumed funding valuation thanks to attractive pricing terms and the medical underwriting process. The deal is about neutral from an accounting valuation perspective, it added.
It said the insurance policy remains an asset of the scheme because it was structured as a buy-in, and therefore has no impact on the scheme's funding level and didn't require Renold to make any additional contributions. The consideration for the buy-in will be entirely funded by a portion of the scheme's holding of index-linked UK government bonds.
It didn't give any details about the parties involved in the buy-in.
The high liability members are those with higher annual pension incomes who represent a significant concentration of longevity risk for the scheme.
"The most significant impact of the transaction on the group is the de-risking effect on this section of current pensioner liabilities. The group is now fully protected from volatility in longevity, inflation and interest rates in respect of these members. These factors will be relevant to future triennial revaluations and funding discussions with trustees," Renold said.
"The buy in of 25% of current pensioner liabilities is an important step in de-risking the group's cash flows and balance sheet from the impact of volatility in pension liabilities. Re-building the group's balance sheet and closely managing our legacy pension obligations are important aspects of the group's overall strategic objective to deliver sustainable gains in shareholder value" Chief Executive Robert Purcell added.
Renold shares were up 1.0% at 62.60 pence Wednesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @stevemcgrath1
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