Clarks insures £540m in second buy-in
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The pension fund of footwear firm Clarks invested in a second buy-in policy last November, meaning nearly all of its defined benefit liabilities are now insured.
The second buy-in with Pension Insurance Corporation was struck with the trustees of the C&J Clark Pension Fund’s CJC Section and Flexible Section for £540 million. It follows a 2022 buy-in with PIC for £276m and insures the pensions of almost 5,000 pensioners and dependants and over 3,000 deferred members. The previous deal covered 2,000 members.
Trustee chair Libby Edwards said: “We’re delighted to have completed this transaction with PIC, which secures the long-term security of all our members’ benefits. Our experience of PIC’s customer service following the previous transaction meant choosing to work with them again was an easy decision.”
Clarks chief financial officer Philip Yau said the company was pleased to achieve its long-standing ambition to fully buy in the C&J Clark Pension Fund, calling it “a major step in fully securing members’ benefits at the same time as eliminating pension related balance sheet volatility”.
Hymans Robertson partner Michael Abramson was the lead adviser to the trustee.
“The key to success was early engagement with the insurers, setting out a clear set of objectives so that the trustee was able select the right partner for their members,” Abramson said about the deal.
PIC’s head of new business strategy, Deepash Amin, said: “It is always rewarding to complete repeat business with clients who have had first-hand experience of our exceptional customer service.”
Clarks was advised by Isio, with legal advice from Burges Salmon. The trustees received legal advice from Travers Smith and used investment advisers WTW and covenant advisers Penfida. PIC was advised by CMS.
In the run-up to the second buy-in, the DB scheme gradually derisked its investment strategy. According to its latest newsletter, this included a full redemption of its Alpha Real Capital investment and the sale of a £20m investment with Equitix, both in 2023. The trustees then instructed Equitix and Greencoat to disinvest all remaining holdings, investing in interest rate and inflation hedging assets instead. In the third and fourth quarters of last year, the pension fund continued to redeem its alternative credit holdings to buy more interest rate and inflation hedging assets before most of the assets were transferred to PIC, with a small balance being kept in the scheme.
In April 2024, the £754m CJC Section was 99% funded, with the £15.8m Flexible Section showing a 91% funding ratio, and the company contributing until the end of 2026 to plug the gaps.
However, for a full buyout, there is a larger shortfall. The full 2023 valuation found £33m would be needed to bring the CJC Section to full solvency funding, and £3m for the Flexible Section.
The shoe company set up by brothers Cyrus and James Clark in 1825 had to undergo a company voluntary arrangement in 2020, when the founding family ceded control to Chinese former gymnast Li Ning and private equity group LionRock Capital. The smaller Flexible Section went into Pension Protection Fund assessment but exited the PPF two years later.
The second buy-in with Pension Insurance Corporation was struck with the trustees of the C&J Clark Pension Fund’s CJC Section and Flexible Section for £540 million. It follows a 2022 buy-in with PIC for £276m and insures the pensions of almost 5,000 pensioners and dependants and over 3,000 deferred members. The previous deal covered 2,000 members.
Trustee chair Libby Edwards said: “We’re delighted to have completed this transaction with PIC, which secures the long-term security of all our members’ benefits. Our experience of PIC’s customer service following the previous transaction meant choosing to work with them again was an easy decision.”
Clarks chief financial officer Philip Yau said the company was pleased to achieve its long-standing ambition to fully buy in the C&J Clark Pension Fund, calling it “a major step in fully securing members’ benefits at the same time as eliminating pension related balance sheet volatility”.
Hymans Robertson partner Michael Abramson was the lead adviser to the trustee.
“The key to success was early engagement with the insurers, setting out a clear set of objectives so that the trustee was able select the right partner for their members,” Abramson said about the deal.
PIC’s head of new business strategy, Deepash Amin, said: “It is always rewarding to complete repeat business with clients who have had first-hand experience of our exceptional customer service.”
Clarks was advised by Isio, with legal advice from Burges Salmon. The trustees received legal advice from Travers Smith and used investment advisers WTW and covenant advisers Penfida. PIC was advised by CMS.
In the run-up to the second buy-in, the DB scheme gradually derisked its investment strategy. According to its latest newsletter, this included a full redemption of its Alpha Real Capital investment and the sale of a £20m investment with Equitix, both in 2023. The trustees then instructed Equitix and Greencoat to disinvest all remaining holdings, investing in interest rate and inflation hedging assets instead. In the third and fourth quarters of last year, the pension fund continued to redeem its alternative credit holdings to buy more interest rate and inflation hedging assets before most of the assets were transferred to PIC, with a small balance being kept in the scheme.
In April 2024, the £754m CJC Section was 99% funded, with the £15.8m Flexible Section showing a 91% funding ratio, and the company contributing until the end of 2026 to plug the gaps.
However, for a full buyout, there is a larger shortfall. The full 2023 valuation found £33m would be needed to bring the CJC Section to full solvency funding, and £3m for the Flexible Section.
The shoe company set up by brothers Cyrus and James Clark in 1825 had to undergo a company voluntary arrangement in 2020, when the founding family ceded control to Chinese former gymnast Li Ning and private equity group LionRock Capital. The smaller Flexible Section went into Pension Protection Fund assessment but exited the PPF two years later.
