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The trustees of the P&O Pension Scheme have agreed a £440m buy-in with Rothesay this month, securing the benefits of about 5,300 members. The scheme is sponsored by P&O Steam Navigation Company.
The buy-in means that the benefits of all the scheme’s members are now insured. The scheme previously completed a transaction to cover its existing pensioners in 2007 in what was one of the first buy-ins. The first pensioner buy-in was written by Paternoster, which was bought by Rothesay through a Part VII insurance business transfer in 2011, meaning all scheme members are now insured with the same provider.
The trustees had Barnett Waddingham as actuarial and risk transfer advisers, while legal advice was provided by Eversheds Sutherland and administration and investment services by Mercer. Rothesay was advised by law firm CMS.
Thanking all involved, trustee chair Steve Delo said the transaction “caps many years of hard work by a diligent trustee board and brings to fruition the vision that our senior pensions manager, Jane Healy, has pursued with focus and determination since she joined P&O over a decade ago”.
The scheme sponsor is owned by Dubai-based logistics firm DP World. Rashid Abdulla, the chief executive and managing director of DP World European Region and director of P&O Steam Navigation Company, said the company has worked closely with the trustee and its advisers to support the pension scheme. “This deal acts to further increase the security of pension benefits for members, whilst reducing risks.”
Rosie Fantom, head of bulk annuities and risk partner at Barnett Waddingham, said this buy-in has been completed within nine months of the consultancy’s appointment as risk transfer adviser.
“We guided the trustee through focussed preparations and driving a competitive process in an exceptionally busy risk transfer market. As one of BW’s longstanding scheme actuary clients, we were able to identify a market opportunity and help the trustee to respond quickly," Fantom said.
For Rothesay, the deal is one of a number expected this year. Róisín O’Shea, who looks after business development at Rothesay, noted there is currently "a very buoyant bulk annuity market”, saying its capital strength among others means the insurer is well placed “to convert the exciting new business opportunities we are continuing to see”.
So far this year, the life insurer has announced a £260m buy-in for the Smith & Nephew UK Pension Fund of the medical technology company, a £160m full buy-in for Repsol Sinopec, a £1.4bn buy-in for the Safeway Pension Scheme sponsored by supermarket chain Morrisons, a £762m buy-in with the 1967 Section of the Morrisons Retirement Saver Plan, and a £34m buy-in for Shoe Zone, with the P&O transaction the latest one.
DP World made headlines in spring 2022 when the firm dismissed the entire workforce of P&O Ferries and replaced them with low-paid international agency workers, citing business viability. There were concerns over the pension funds linked to the ferries business at the time, in particular its obligations in the Merchant Navy Ratings Pension Fund, an industry-wide scheme. In May this year, MNRPF and DP World said they had reached an agreement but did not disclose details.
What are the pros and cons of agreeing a buy-in before a buyout?
