On the go: The Co-operative Pension Scheme has completed a £350m buy-in with Aviva, taking its total transactions this year beyond £2bn, as defined benefit schemes look to capitalise on cheaper deals amid the coronavirus pandemic.
Aviva announced on Wednesday it will insure the benefits of 2,300 members of the retail group’s pension fund, removing the investment risk of covering these employees’ retirements from the scheme.
This follows the Co-operative’s £1bn transaction with Aviva in January, when the multinational insurer took on the responsibility of paying the benefits of approximately 7,000 members, and another £1bn transaction with the Pension Insurance Corporation in the following month.
“All parties have been closely monitoring pricing, given that current market conditions presented potential opportunities for the scheme,” said Tom Ground, Aviva’s managing director of annuities and equity release.
“We are delighted to have completed a second transaction this year with the Co-operative Pension Scheme.”
Total bulk annuity transactions exceeded a record-breaking £40bn in 2019, while Hymans Robertson estimates that an average of £37bn a year could continue to flow to insurers over the next decade, amid lower tolerance for risk and increasing concerns around the strength of sponsoring employers.
But the pensions adviser also predicted that annual demand could soar to £54bn, as markets were whiplashed by the pandemic and widening credit spreads fuelled a buyout bonanza for well-positioned DB schemes.
The Co-operative Pension Scheme’s buy-in with Aviva was negotiated by Aon, while legal and investment advice was provided by Linklaters and Mercer, respectively.
“By leveraging the previous buy-in transaction with Aviva, we were able to capture a short-term pricing opportunity on behalf of the trustee,” said Tom Scott, principal consultant in Aon’s risk settlement group.
