M&S transfers £1.4 billion in pension liabilities to insurers

Marks and Spencer’s pension scheme has passed 1.4 billion pounds of its liabilities to Aviva and Phoenix, the insurers said on Thursday, as companies look to reduce the risk from their pension funds.

British companies such as Pearson and Smith Group are starting to transfer pensions calculated on workers’ final salaries to insurers, to take the pensions risk off their own balance sheets, a trend that is encouraging new insurers into the sector.

The Marks and Spencer pension scheme has nearly 9 billion pounds in liabilities, according to its most recent triennial valuation.

Specialist providers say they can run pensions and life policies at a lower cost by using economies of scale, investing more astutely and using actuarial expertise to match assets more closely to liabilities - and thereby reduce risk.

Aviva took on 925 million pounds of the British retailer’s defined benefit pension liabilities in its biggest deal to date in the so-called bulk annuity market, while Phoenix completed its first bulk annuity deal, for 470 million pounds, the insurers said in statements.

Aviva and Phoenix said they had set up structures to allow them to take on more of the scheme’s liabilities if needed.

Specialist pension provider Just Group’s shares jumped 12 percent on Thursday after it reported a sharp rise in retirement sales in the first quarter.