Vestey Foods Group

Three bulk annuities culminating in a buy-out

For many years now, we have been working hard to fully de-risk this scheme, and this last transaction completes the final step in our journey. We returned to Rothesay Life on more than one occasion because at every step they provided a low-risk solution with operational precision and accompanying longevity, pension increase and re-investment protection​.

Ben Fowler, Group Head of Reward for Vestey Group Ltd

Key Facts

  • £500m bulk annuity policy for the Western United Group Pension Scheme, a scheme belonging to the Vestey Foods Group
  • Repeat business across three separate bulk annuity policies with Rothesay Life, combined into a single £500m bulk annuity policy
  • All transactions completed by exchanging matching gilts and cash for a bulk annuity policy

The timing of the bulk annuity transactions with Rothesay Life, occurring across a variety of equity, credit and gilt market conditions (indices rebased to 100 as at January 2012)

The Transaction

  • The Trustee of the Western United Group Pension Scheme and the Vestey Group had a long-term view to fully de-risk the pension scheme and had transitioned a number of risky assets into gilts
  • As the next step of the journey, a process was run at the end of 2012 to purchase a bulk annuity for a portion of the scheme’s pensioner liabilities
  • Following a competitive tender process, Rothesay Life was chosen to insure £115m of member benefits in order to remove investment risk, pension increase risk and longevity risk
  • The transaction was structured such that Rothesay Life would provide a bulk annuity policy in exchange for the gilts and cash that were already held against the scheme’s liabilities for matching purposes.
  • When a second transaction was completed in March 2014 for £111m covering the remaining pensioners, the Trustee did not expect to be able to afford a full buy-out
  • Solvency levels and annuity pricing for long-dated liabilities, however, moved in the right direction and Rothesay was able to secure the remaining liabilities (for deferred pensioners) in June 2014 (see graph above)
  • Having completed extensive checks on the legal documentation and benefit calculations, Rothesay also covered the scheme for any additional liabilities relating to changes in data or benefit calculations and to any missing beneficiaries that might emerge

The conclusion

  • Individual policies have been issued to the scheme members enabling the scheme to wind-up

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