Rentokil Initial 2015 Pension Scheme, Camberley, England, insured £1.5 billion ($1.9 billion) in liabilities through a buy-in with Pension Insurance Corp., John Baines, partner at Aon and adviser on the deal, said in a telephone interview.
The deal was the £1.5 billion pension fund's only risk transfer transaction and will lead to a full buyout to be completed in 2020, when all future liabilities will be removed from the company's balance sheet.
Through the buy-in, Rentokil secured benefits of 14,200 active and deferred plan participants as the plan becomes fully hedged against longevity, interest rate and inflation risks, Aon said in a news release. Following the buyout, participants in the plan will be provided with individual annuity policies with PIC.
The fund's accounting surplus, at £373.2 million as of June 30, will be written down to the estimated cash surplus as of Dec. 31.
"Guaranteed minimum pension equalization was one of the key considerations in the transaction," as it could lead to uncertain buy-in market pricing, Mr. Baines said.
A ruling last month in a Lloyds Banking Group court case made compulsory guaranteed minimum pension equalization mandatory among male and female workers.
"This action de-risks the scheme for the benefit of members and the company," Rentokil Initial CEO Andy Ransom said in a news release. "We have supported the scheme over many decades and over that period made significant cash contributions to remedy a deficit that has existed between the scheme's assets and liabilities."