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Littlewoods Pensions Scheme completes £880m buy-in with Scottish Widows

31 May 2018

The Trustee of the Littlewoods Pensions Scheme has purchased an £880m pensioner buy-in policy from Scottish Widows.

The policy passes the risks associated with c60% of the liabilities in the Scheme to Scottish Widows and provides a monthly income to the Trustee to meet the pensions payable to nearly 7,000 members of the Scheme. The buy-in is Scottish Widows’ largest bulk annuity transaction to date.

The buy-in is a key milestone for the Trustee and its sponsor, Shop Direct, a multi-brand online retailer. The Scheme already benefited from a strong funding position, having been an early mover to hedge its interest rate and inflation exposures, and the attractive pricing negotiated with Scottish Widows will improve the Scheme’s funding position further and reduce the downside risks faced by the Scheme.

LCP was appointed to advise the Trustee on the planning, structuring and negotiation of the buy-in transaction. ARC Pensions Law provided legal advice to the Trustee whilst Scottish Widows were advised by Eversheds Sutherland.

Colin Thwaite, Chairman of Trustees for the Scheme, said: "We are delighted to have completed this buy-in transaction with Scottish Widows, covering well over half of our liabilities. The attractive pricing of the transaction has closed the gap to being fully funded and further reduces the risk profile of our investments to meet members’ pensions.”

Derek Harding, Shop Direct Finance Director, said: "We are extremely pleased with this buy-in with Scottish Widows, which protects the Scheme’s strong funding position. As sponsors of the Littlewoods Pensions Scheme, we are delighted to have locked in attractive market pricing for the benefit of the members and the employer. The Trustee have managed the investment strategy very successfully and the Scheme remains in a healthy surplus on a prudent self-sufficiency basis, making it one of the best funded DB schemes in the country."

David Stewart, Partner at LCP, said: “Our role as specialist adviser is to get the focus of insurers who are choosing where to allocate their best pricing. We’re delighted to have helped the Littlewoods’ Trustee achieve excellent value by articulating clear transaction objectives to the insurers and executing quickly once these objectives were met. The pricing negotiated surpassed the Trustee’s original expectations and moves them significantly forwards towards full de-risking.”

Emma Watkins, Bulk Annuity Director at Scottish Widows, said: "We are proud to have been chosen by the Trustee for this significant buy-in. Scottish Widows, the Trustee and their advisors have worked closely together to ensure the buy-in was implemented smoothly. Shop Direct is an important client of Scottish Widows’ parent Lloyds Banking Group which provides commercial banking services to the company. We are pleased to strengthen an existing relationship through this arrangement."