CAA seals £90m deal to sell pension liabilities

The Civil Aviation Authority is reported to have signed a £90 million deal to sell its pension liabilities to the Pension Insurance Corporation.

The deal, known as a buy-in, will see the aviation regulator pass £90 million of pension promises on to insurer PIC, according to the Financial Times.

It covers only part of the more than £2 billion of liabilities in the CAA scheme. About £1.6 billion of those liabilities were passed on to insurer Rothesay Life in a similar undertaking in 2015.

Pensions adviser Lane, Clark & Peacock expects more than £15 billion of corporate pension promises to be transferred to insurers this year via both buy-ins and larger, more comprehensive deals known as buyouts.

That would beat the record £13.2 billion of deals signed in 2014. Last year was a relatively quiet one in the pension insurance market, with just over £8.5 billion of deals, according to LCP.

Charlie Finch, a partner at LCP, said that the introduction of the EU’s Solvency II capital rules at the start of 2016 was partly to blame.

“A lot of deals were brought forward into the fourth quarter of 2015, which was the busiest on record,” he said. “There was a concern that Solvency II would have an adverse impact on pricing, but that didn’t happen.”

LCP said that political and economic uncertainty will help to spur activity in 2017.

“There is a sense that 2016 highlighted risks not just in the pension schemes but also in the economy,” Finch said.

He added that prices for buy-ins and buyouts have become more attractive for pension schemes. That is because insurers have been able to find high-yielding assets, such as infrastructure and equity release mortgages, to back the pension promises.

PIC said that there is already plenty of interest in the market, including from large schemes that have previously shied away from deals with insurers.

Tracy Blackwell, chief executive of PIC, said: “Post-Brexit the market took off. Once Solvency II had bedded in and everyone realised what it would do to prices, there was a log jam to clear. We had an incredibly busy second half to the year, and we have never gone into a new year with a pipeline like we have now.”

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