TheScheme’s £3.8bn ($4.9bn) buy-in has been secured in anticipation of a full ‘buy-out’ of the Schemeand will be enabled by a one-off final pension contributionfrom Asda
Asda, Walmart and the Trustee of the Asda Group Pension Scheme today announce an agreement for a bulk annuity insurance ‘buy-in’ ofthe Scheme with Rothesay Life, a specialist insurer of defined benefit pension schemes. The agreementsecures the benefits of members -providingcertainty and security for all of the Scheme’sapproximately12,300members (4,800pensioners and 7,500 deferredpensioners).TheSchemeis separate to the Asda Pension Plan, a defined contribution scheme, which provides ongoing pension arrangements to the majority of Asda’s colleagues.
TheScheme’s£3.8bnbuy-in has been secured in anticipation of a full ‘buy-out’ of the Schemeand will be enabled by a one-off final pension contributionfrom Asda of approximately £0.8bn($1.0bn).
Following buy-in,members of the Scheme will be provided with individual annuity policies issued by Rothesay Life, who will then be responsible for paying members’ benefits in full. These individual policies will replace the bulk annuity policyand bring about a full scheme buy-out,expected to be completed in late 2020 or early 2021.
At the time ofthe completion of thebuy-out Walmart will recognize a pre-tax charge to earnings of approximately $2.2bn, of which $1.2bnrelates to non-cashitems. The transaction will remove all future Scheme liabilities from the Asda andWalmart balance sheets, simplifying the business at a cost which is significantly below the expected future cost of funding internally. The Parties have made the decision to take this step now having agreed jointly that market conditions are favourable and because pension liabilities can be more effectively managed by a large insurer,such as Rothesay Life,given their scale and expertise in this area.
On 31 December 2018, Rothesay Life (A+ rated) had insured 770,000 pension scheme members and had £36 billion in assets under managementacross their portfolio. Recent transactions have seen Rothesay Life grow tobe the largest specialist annuity provider in the UK market.
Roger Burnley, Chief Executive of ASDA, said: “This transaction is anexcellent outcome for our Scheme members–and for Asda and Walmart. Wehave supported the Scheme over many decades through significant cash contributions. That funding, combined with strongstewardship by the Scheme’s trustees, has resulted in thevery positive situation where the Scheme can now be transferred to an A+ ratedinsurance company, Rothesay Life–de-risking the scheme and providing long term, sustainable support for its members.”
Source: Company Press Release