Goldman unit insures Vestey Group's UK pension fund

LONDON Mon Jan 21, 2013 6:43am EST

LONDON Jan 21 (Reuters) - Goldman Sachs's insurance arm has agreed to insure 115 million pounds ($182 million) of liabilities of food distributor Vestey Group's retirement fund, making it the biggest player in the UK market for so-called bulk purchase annuities.

Vestey's final salary-linked retirement plan, known as the Western United Group Pension Scheme, is paying Goldman's Rothesay Life for a form of investment policy that will generate income to cover payments to its 14,000 members, the insurer said on Monday.

The transaction exchanged UK gilts for a bulk annuity insurance policy to cover a portion of the pension liabilities associated with Vestey's pension scheme, Rothesay Life said in a statement.

Rothesay, which launched in 2007 and acquired rival Paternoster in 2011, said it wrote over 1 billion pounds of new bulk annuity business in 2012, and expects a "strong pipeline of opportunities" for 2013.

Demand for bulk annuities has grown strongly in recent years as pension funds, hit by longer lifespans and volatile financial markets, seek to offload some of their obligations to insurers, which are financially stronger and more expert in handling risk.

In particular, British firms offering final salary-linked pensions - known as defined benefit schemes - are struggling to cope with rising deficits, exacerbated by weak economic growth and repeated rounds of central bank easing, which have contributed to a drop in the yield on British government bonds.

Meanwhile, UK specialist insurer Pension Insurance Corporation completed a bulk annuity deal, which covers up to 30 million pounds of liabilities for the pension fund of metals company Vesuvius, the insurer said on Monday.

The deal is the second bulk annuity transaction Pension Corp has completed with the Vesuvius retirement fund - called the Cookson Group Pension Plan - following a 320 million pension insurance transfer deal in July 2012, Pension Corp.

The recent deal will cover the liabilities of employees that retire in each of the next three years.

Defined benefit pension scheme deficits doubled to 231 billion pounds last year, according to the Pension Protection Fund.

Rothesay and Pension Corp compete with the likes of Legal & General, Aviva and Prudential in the bulk annuity market.

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