General Motors UK signs £230 million annuity contract with Rothesay Life
By Kevin Olsen | December 13, 2012 4:02 pm
General Motors UK Ltd., Luton, England, entered into a £230 million ($371 million) pension buy-in annuity contract with Rothesay Life to secure the pension benefits of all participants in the General Motors UK Retirees Pension Plan, confirmed GM spokesman Denis Chick.
The plan's liabilities will remain the company's responsibility; Rothesay Life will insure the plan against the future liabilities.
The administration and payment of pensions to participants remain unaffected by the transaction, according to a news release from Rothesay Life.
Myles Pink, co-head of the business development team at Rothesay, said in an interview that GM was looking to derisk the pension plan. Mr. Pink added pension buy-ins give flexibility to the plan to potentially do a full buyout in the future. He would not comment on what GM's ultimate goals are in terms of pursuing a buyout.
On June 1, GM agreed to purchase a pension buyout annuity contract from Prudential Insurance Company of America to transfer $26 billion in U.S. pension liabilities off its balance sheet to Prudential.
Mr. Pink said the policy was executed at a time of favorable pricing in the U.K. annuity market. He said pension plans that are holding gilts have performed well in a falling interest-rate environment, making buy-ins more attractive as they use their gilts to purchase bulk annuities. The switch to bulk annuities allows plans to pick up protections, such as longevity risk removal and interest-rate hedging to provide a closer match to liabilities with little impact on returns.
Lane Clark & Peacock advised GM on the deal.
Details on the U.K. plan's assets and liabilities could not be immediately learned.