Aberdeen City Council completes buy-in transaction with Rothesay

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The Aberdeen City Council Transport Fund has completed a £230m (€256.8m) pensioner buy-in transaction with Rothesay, insuring the pension payments of 1,360 retired FirstGroup employees.

According to Rothesay, the fund is only the second local government pension scheme (LGPS) to secure its pension obligations through an insurance policy.

In 2012 a public sector scheme administered by West Midlands Pension Fund completed a £270m bulk annuity buy-in. The West Midlands Integrated Transport Authority (WMITA) pension fund – part of public transport group Centro – first put the buy-in out to tender in October 2011, estimating the deal would cost £230m.

Laura Colliss, pensions manager for Aberdeen City Council, said: “We are very proud to be able to offer our members the protection to their pensions and peace of mind that this insurance policy provides. This transaction underscores the commitment to meeting the pension obligations and places the fund and the tax-payer in a strong position for the future.”

Roisin O’Shea from Rothesay, said despite all the uncertainties last year, there is “a continued focus on de-risking from pension schemes with 2020 looking to be the second largest year for the market.”

The transaction was led by Mercer, acting for Aberdeen City Council, with Brodies providing legal advice to the fund. Rothesay received legal advice from Linklaters.

Adrian Marshall, LGPS risk transfer specialist at Mercer, said: “We worked with the council to devise a clear, well-structured broking and procurement process to maximise insurer engagement to secure the best deal for all stakeholders. By entering into this buy-in with Rothesay, the council has minimised its exposure to future volatility on around three-quarters of the fund’s liabilities.”

Ian Hodgson, group pensions manager of FirstGroup, said: “This buy-in is the culmination of a project to sustainably de-risk our Scottish LGPS funds. After the successful merger of our obligations from the Strathclyde Pension Fund, this buy-in has removed £230m of pensions risk from the company, securing the pensions for some 1,360 members in the process.”