The trustees of the Graham & Brown retirement benefits scheme have signed a second pension insurance buy-in agreement this week with the insurance company Pension Insurance Corporation (PIC).

The trustees of the scheme, which has roughly 900 members in total according to data held by Pension Funds Online, were advised by Xafinity Consulting and the transaction uses an innovative 50% phased premium structure. This structure, which covers around £15m of liabilities, means that the trustees are able to insure all the pensioners at the point of signing the transaction, but with only 50% of the premium paid up front. The remaining premium will be spread over five years.

The deferred premium structure was first brought to market by PIC in a pension insurance buyout with the Arnold Laver pension scheme, in September 2010. Under this structure, the trustees have immediately insured the key risks associated with paying the pensions, such as longevity, inflation and interest rate.

The transaction also allows the trustees to defer the premium needed to insure deflation risk to the point when deflation occurs, saving approximately 5% on the premium for a subset of the insured pensions. PIC has also agreed to administer future retirees as they arise.

Graham & Brown is a prominent player in the designer wall decoration market. John Carter, chairman of the firm's pension scheme, said: "This innovative buy-in with PIC has allowed us to achieve our aim of insuring all our pensioners on day one, despite having a small deficit. The deferred premiums will be payable over the next five years, replicating the scheme's funding plan, but removing volatility and risk and providing certainty about pension payments."

First published 18.07.2012

azeevalkink@wilmington.co.uk