UK Interserve scheme agrees £300m buy-in with Aviva

The Interserve Pension Scheme has completed a £300m (€375m) buy-in of its pensioner liabilities, with Aviva insuring the risk.

The deal will cover around 35% of the fund’s liabilities, according to a joint statement from the sponsor and insurance company, with chairman of the trustee David Trapnell praising the “significant” reduction in risk achieved.

At £300m and the insurer’s largest bulk contract since 2008, the deal highlights Aviva’s turnaround within the bulk annuity space and exceeds its desired limit of individual arrangements.

Despite previously being a large market player, it set a £50m cap on individual deals, before raising this to £200m in the wake of this year’s Budget.

Interserve, a FTSE 250 company, previously used a portfolio of private finance initiatives (PFIs) as contingent assets to address a deficit within the defined benefit scheme, part of which were sold to the Pensions Infrastructure Platform in April.

The buy-in was completed after a competitive tender process, with consultancy LCP and Sacker & Partners acting as advisor to the trustee.

Trapnell added: “This transaction represents a significant risk reduction step for the Interserve Pension Scheme, reducing funding volatility and providing additional protection for all our members’ benefits.”

Emma Watkins, partner at LCP added that the use of a “tried and tested” buy-in procedure allowed terms and pricing to be negotiated within four months of the trustee formally approaching insurers.

Aviva’s director of bulk purchase annuities Nick Johnson said the firm was increasingly seeing mid-size bulk annuity agreements “being dealt with in a streamlined way, similar to smaller deals”.

In April, in the wake of a UK government decision to scrap forced annuitisation of individual defined contribution pension pots, IPE reported that Aviva would be more aggressively pursuing bulk annuity deals.

The deal follows the announcement of two larger transactions yesterday, with the Western United Group Pension Scheme agreeing a £280m de-risking deal with Rothesay Life and the PGL Pension Scheme agreeing a £900m longevity swap.

The UK regulator earlier this week also settled a long-running dispute with the estate of Lehman Brothers, agreeing to a £184m settlement that would allow the underfunded scheme to pursue a buyout.