£800m buyout of new BHS pension scheme

14 / 09 / 2018

Pensions Insurance Corporation has announced an £800m buyout of the new BHS pension scheme, BHS2, on 12 August. BHS2 members were approximately 9,000 BHS pension scheme members who did not take a cash lump sum or transfer to the PPF, opting to transfer to the new sponsorless scheme under the terms offered by the predecessor BHS schemes.

This buyout represents a more secure position for the membership, guaranteeing the BHS2 benefits in full. The news comes against the backdrop of a predicted record-breaking year for the bulk annuity market. Hymans Robertson predict pension scheme buy-in and buy-out volumes to reach a record £18bn in 2018, the result of a combination of attractive pricing by insurers and de-risking following recent improved funding levels.

Trustees and employers of schemes which are moving towards a buy-out or bulk buy-in in the near future should be aware of steps they can take to ensure their scheme is well placed in the current market conditions. Carrying out a scheme documents “health check” and putting together a benefit specification is an important first step and will allow trustees to identify potential issues and stumbling blocks at an early stage. Insurers are likely to favour well-prepared schemes as it will lead to a more straightforward transaction, and getting this preliminary housekeeping underway as early in the process as possible will allow trustees to watch market movements and time their approach to insurers. Equally important is having the right team of advisers on board who can guide trustees through the many technicalities inherent in the process – a factor which helped to secure the BHS2 benefits sooner than had been anticipated.