Smiths derisks DB schemes amid strategic transformation
Image: Smiths Group
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The Smiths Industries Pension Scheme for the industrial engineering firm completed a £760m buy-in covering more than 10,000 members in July, following the buyout of the TI Group Pension Scheme in May, as it focuses on flow control and thermal solutions.
The transaction with M&G means the benefits of all 17,000 scheme members are now insured across five policies with M&G-owned Prudential Assurance Company, as well as Canada Life and Pension Insurance Corporation.
Nicholas Godden, who chairs the scheme with over 30 sections, called the buy-in an important milestone that had been in the planning for years. "All members of the scheme are now covered by an insurance policy, further improving the long-term security of their benefits while leaving their benefit entitlements unchanged," he said.
The deal was advised by Hymans Robertson. Partner Michael Abramson said the insurer selection put "significant emphasis on member experience, administration and implementation capability alongside pricing".
Head of bulk annuity origination and execution at M&G, Rosie Fantom, said the buy-in "highlights the strength of our proposition and our ability to support schemes of varying size and complexity".
The full buy-in comes after the £900m buyout in May of the TI Group Pension Scheme, which was Smiths other main defined benefit scheme. Its roughly 15,500 members now receive their benefits through Aviva, Legal & General, PIC and Rothesay.
Group pensions director Simon Powell of the London-based firm said the bulk annuity deals were testament to the expertise and diligence of the teams involved, adding: "It reinforces our ongoing commitment to protect the long-term security of our members' benefits and ensures long-term financial stability to Smiths."
Both transactions form part of a strategy to derisk legacy obligations and follow the sponsor's sale of Smiths Interconnect to Molex Electronic Technologies for £1.3bn and Smiths Detection to CVC Capital for £2bn, both of which completed this year.
Smiths chief financial officer Julian Fagge said the pension risk transactions enhance the firm's balance sheet and show the firm is committed to the responsible management of legacy obligations.
"These transactions provide greater financial security for our scheme members remove pension risk and future cash funding requirements and reduce balance sheet volatility," Fagge said.
