Food and drink ingredient supplier Tate & Lyle has agreed a £930m annuity insurance “buy-in” with Legal and General.
Tate & Lyle has transferred its pension scheme so it is underwritten by the financial services giant, which it said would provide “certainty and security” for its affected members.
Today’s buy-in follows the first transaction undertaken by the Tate & Lyle and Legal & General in 2012 for £350m, meaning all scheme members are now covered by Legal & General, with a total value of approximately £1.2bn.
Tate & Lyle said it did not expect the deal to affect profit before tax for the next financial year, but said the scheme’s £5m net finance income for 2019 would be erased. This will also mean net equity will reduce by around £180, the firm said.
The deal means that Tate & Lyle no longer bears any investment, longevity, interest rate or inflation risk in respect of the scheme, nor will it contribute any incremental funding to the scheme.
Tate & Lyle chief financial officer Imran Nawaz said: “This transaction represents a good outcome for our UK scheme members, the company and our shareholders.
“We have supported the scheme over many decades and made significant cash contributions to remedy a deficit that has existed between the scheme’s assets and liabilities. That funding, combined with excellent stewardship by the scheme’s trustees, has meant that the scheme can now be de-risked for the benefit of members and the company.
“Importantly, cash contributions into the scheme will cease, saving around £20m of cash annually from the 2021 financial year, allowing the company to focus our future investments on delivering profitable growth.”
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Michael Chatterton, chairman of trustees of the scheme, said the deal was “great news for members”.
“After many years of funding from Tate & Lyle and careful management, working together in close partnership with the company, we have now secured our members’ benefits through Legal & General. As a result, our members can continue to look forward to enjoying retirement knowing that their pensions are secure.”