Cobham Pension Plan enters £280m bulk annuity contract

The trustees of the Cobham Pension Plan have insured its £280m of liabilities in a bulk annuity transaction with Rothesay Life.

UK gilts and cash were exchanged for a bulk annuity insurance policy, which is being held as an investment by the trustees.

The trustees were advised by LCP. Cobham, a FTSE 250 aerospace and defence business, was advised by KPGM.

Cobham chief financial officer Simon Nicholls said: “This transaction, which was prefaced in the group’s 2012 financial statements and follows two smaller buy-in transactions on separate defined pension plans completed in 2011, represents a significant step towards de-risking the group’s defined benefit pension plans using the plan’s assets and adds further levels of security to the plan’s obligations towards its members.”

The deal is another in what has been a strong year for de-risking transactions.

Analysis from Aon Hewitt this week showed insurers placed £1.1bn of pension de-risking business in the second quarter, putting the market on track to exceed the £5bn reached last year.

Last quarter’s result adds to the almost £2bn of business written in the first three months of the year. Aon Hewitt said the market performance reflects competitive market pricing and a release of some of the pent up demand for de-risking pensions.

Legal & General, Pension Insurance Corporation, and Rothesay Life wrote 90 per cent of business placed in the first half of the year, after also ending 2012 with most of the year’s bulk annuity sales.

PIC had a 47 per cent share of the bulk annuity sales market in the second quarter, followed by Rothesay Life with 25 per cent and L&G with 19 per cent. L&G led the market in the first quarter with a share of 41 per cent, followed by PIC with 30 per cent and Rothesay Life with 22 per cent.

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