Consolidation on the rise in Q2 as corporate pension funds aim for endgame
Consolidation continued apace in the second quarter of 2024. MandateWire observed an increase in the number of bulk annuity deals signed by the 37 UK corporate pension funds surveyed in the quarter.
““When we understood we could purchase a bulk annuity with our available assets, we knew we had to take advantage and approach the market as quickly as we could””
Meanwhile the six pension consolidators and providers we spoke with looked to diversify their investment portfolios into private markets while remaining mindful of socially responsible investment requirements.
Buy-ins
Sixteen pension funds agreed buy-ins in Q2, with the total volume of assets insured hitting $4.5bn. This was double the eight deals worth $3.4bn inked in the first quarter of the year.
Of those 16 pension funds, a quarter revealed those buy-ins would convert to buyouts.
The circa £2.6mn ($3.3mn) John Turner Construction Group Staff Pension Scheme was the smallest fund to announce a buy-in during the quarter, covering one pensioner and 18 deferred members.
“When we understood we could purchase a bulk annuity with our available assets, we knew we had to take advantage and approach the market as quickly as we could,” chair of trustees Michael Davies commented as the scheme said it would now proceed to full buyout and wind-up.
Announcing that it had agreed a £130mn buy-in ($164.6mn) buy-in in April, trustee chair of the Telereal Pension Plan Carl Clissold said the fund was now working to prepare for a buyout.
The following month, the £50mn ($63.3mn) European Metal Recycling Pension and Life Assurance Scheme agreed a £33mn ($41.8mn) buy-in to insure the liabilities of 217 deferred and pensioner members. The fund said it expects to secure a buyout during 2025.
All three funds agreed their deals with Aviva Group.
The fourth pension fund to confirm buyout plans was the Rolls-Royce and Bentley Pension Fund, which finalised an £880mn bulk purchase annuity transaction with Phoenix Group subsidiary Standard Life.
The transaction was a full scheme buy-in covering approximately 6,000 members and included an existing £400mn longevity swap which was originally executed in 2013.
The pension scheme aims to reach full funding by 2030 via buyout, according to its statement of investment principles.
Another fund eyeing a buyout was the £42.1mn Nottingham Building Society Pension Scheme.
Rather than opt for a buy-in, the pension fund announced that it had joined Enplan, a defined benefit consolidation platform run by investment advisory firm Isio and trustee company Entrust in order to streamline its operations ahead of a buyout.
Consolidators
Focus for the six consolidation vehicles that MandateWire surveyed in the quarter was on private markets and environmental, social and governance themes.
Capturing both of these themes was Aegon’s £12bn Universal Balanced Collection fund, its largest workplace default fund. The fund selected BlackRock, Aegon Asset Management and J.P. Morgan Asset Management to help it incorporate private market and enhanced ESG investments into its investment offering via long-term asset fund structures.
The appointments, which are in line with the pension provider’s commitment to the Mansion House Compact, will see BlackRock run a diversified alternatives mandate covering private equity, private debt, real estate and infrastructure, as well as a fully ESG-integrated passive equity and bond strategy.
Aegon Asset Management will manage a multi-asset credit mandate from the second half of 2024 and, subject to Financial Conduct Authority approval and operational considerations, a private debt and alternative fixed income fund, from early 2025.
Also in early 2025, J.P. Morgan Asset Management is set to offer an exposure to private equity, infrastructure and forestry.
The £19bn ($24bn) LifeSight (Willis Towers Watson’s defined contribution master trust) and the £2.3bn ($2.9bn) Cushon Master Trust were both also looking at private market LTAFs.
Cushon’s chief investment officer Veronica Humble told MandateWire the trust wanted to allocate a larger investment to natural capital, as well as a venture capital LTAF, as it expands its private market exposure.
