Hays Recruitment has completed a £270.6m buy in with Canada Life, as it looks achieve a full buy out of the £1bn scheme.
The group confirmed the deal, insuring over 2,000 members in the defined benefit scheme, in its half year results published today, 30 August 2018, and said it would be targeting full buyout over the next five to 15 years.
According to the group, the de-risking exercise is in line with its long-term strategy to reduce future volatility of its DB scheme, and the potential financial impact this would have on the business, and was funded through existing investment assets held by the trustee.
Speaking to Pensions Age, Hays chief financial officer, Paul Venables, said: “This is a move towards it [full buyout], there are other things going on in the pensions market at the moment … but one would expect a further buy in at some point and then the potential buyout of the scheme, and that could take anywhere from five to 15 years and will depend on the how the market matures over that period."
Venables added that favorable market conditions, changing mortality statistics and good planning allowed the group to complete the buy in this year.
"We were always ready to go, waiting for a more benign market, and coming in to 2018 you had the nice benefit of lots of players looking to do deals," he said.
The group closed its DB scheme to new entrants in 2001 and to future accrual in 2012.
Venables added: "In many respects, on the basis of pension payments … our life could go up to 2075 and I took the view a long time ago that when the market was appropriate we should one move the whole of the scheme to be in a position longer term to do a buyout, and the first part of that is a buy in."
According to Venables, Canada Life were chosen to complete the deal after a "beauty pageant" which saw nine insurers whittled down to one, with the firm scoring "highly across the board".
Hays contributed a further £15.3m to the scheme over the year and reported a pensions surplus of £75.9m on an IAS 19 accounting basis, as at 30 June 2018, compared to the £0.2m deficit recorded at the same period last year.
It said: “The surplus was primarily due to favourable changes in both demographics and financial assumptions (an increase in the discount rate and a decrease in the inflation rate), together with an increase in asset values.”
The group recorded a £95m deficit in its 2015 triennial valuation, agreeing an annual payment of £14m, with a fixed 3 per cent uplift over 10 years.
Hays payed £109.7m in dividends over the year.
The group is currently undergoing its formal actuarial valuation as at 30 June 2018 and is due to be completed in April 2019.