Friends and Norwich Union agree pension buy-in

by Gill Montia

Story link: Friends and Norwich Union agree pension buy-in

Friends Provident has effectively sold its pension scheme by insuring around £350 million of the scheme’s liabilities with Norwich Union.

The move, which is being couched as a pension fund buy-in, transfers the responsibility for paying 3,200 pensioners in Friends Provident’s final salary scheme to Norwich Union.

The scheme’s chairman, Mike Hampton, is keen to point out that the transaction does not affect scheme benefits and how they are paid.

Under the terms of the agreement, scheme members will remain with Friends Provident and will not become Norwich Union policyholders.

The assets of the scheme will remain in an escrow account, being managed by Norwich Union.

In the event that Norwich Union fails to meet its obligations, the fund could be reclaimed by the scheme’s trustees.

For Norwich Union, the deal is the first major pension buy-in so far achieved. It is also notable because Friends has appointed a competitor to manage its pension liabilities.

Pension transfers are becoming increasingly popular because firms are keen to remove such liabilities from balance sheets.

In addition, the Pensions Regulator is developing new guidance on longevity and this is likely to increase liabilities and scheme costs.