Aberdeen Group will replace Stagecoach as the sponsor of its £1.2bn pension scheme, in the first of its kind deal.
Under the terms of the deal, a £50m surplus will be shared with the scheme’s 22,000 members, giving them an initial 1.5 per cent uplift to all benefits, as well as better inflation protection.
The Stagecoach Group Pension Scheme, which has a strong surplus, will be run on, with Aberdeen taking on responsibility for the scheme’s funding as well as the management of the assets, which will include investing in productive assets.
The deal allows for the prospect of future pension increases, depending on the performance of the scheme, with Aberdeen set to receive “a minority share” of any future surplus payout.
LCP has advised Stagecoach on its endgame options and says this transaction supports the group’s objective of simplifying its business and settling its arrangements with the scheme, while ensuring the interests of members and Aberdeen are closely aligned.
This follows Aberdeen’s decision earlier this year to run on its own £2.6bn DB pension scheme — with the surplus unlocked for the benefit of Aberdeen and the scheme’s members.
LCP partner and lead adviser to Stagecoach, Steve Hodder says: “We are delighted to have helped Stagecoach reach their pensions destination, with an innovative solution that is expected to deliver a meaningful boost for 22,000 members.
“This example highlights a continuing trend of well-funded DB schemes being viewed as “an asset” for their members and sponsor, in the right circumstances.”
LCP partner and head of LCP’s corporate consulting practice, Gordon Watchorn adds: “This is an excellent and innovative solution given the specific combination of circumstances of this scheme.
At a time of considerable change for DB pensions, this case reinforces the value of bespoke and innovative advice to ensure our clients reach the best outcome given their objectives.”