Philips Pension Fund, Guildford, England, agreed to purchase a group annuity contract from Pension Insurance Corp. to transfer about €2.6 billion ($2.9 billion) of pension obligations, a Philips news release said.
The transaction will transfer benefit payment responsibility for about 26,000 current employees and retirees and “wind up” the pension fund, the news release said.
The U.K. pension fund currently has about €3.9 billion in benefit obligations, which includes €1.3 billion in obligations covered by existing buy-in transactions.
The two most recent buy-ins took place in August 2013, when Philips entered into a £484 million ($747 million) buy-in with Rothesay Life, and in August 2014, a £300 million buy-in with Prudential U.K.
As part of this transaction, Philips is contributing about £225 million in cash to PIC in the fourth quarter, and Philips has “given notice to the trustees of the U.K. Pension Fund to start the process of winding up the fund,” the news release said. Buy-in policies will then convert into buyout policies.
“As a result, the settlement of the U.K. Pension Fund reduces Philips’ total defined benefit obligations by €3.9 billion to approximately €4.5 billion,” the news release said.
Parent company Koninklijke Philips NV is based in Amsterdam.
Subsidiary Philips Electronics North America Corp., New York, just announced its own buyout on Oct. 2, purchasing group annuity contracts from American United Life Insurance Co., Banner Life Insurance Co. and Prudential Life Insurance Co. of America to transfer about $1.1 billion in liabilities.
Steve Klink, Philips spokesman, did not reply to a request for further information by press time.