17th Dec 2015 11:56
LONDON (Alliance News) - WYG PLC on Thursday said it has agreed to allow the risks associated with its last remaining defined benefit scheme to be transferred to a specialist insurer.
The scheme provides defined pension benefits to former employees, and the new agreement means "full member benefits" have been secured, with no additional financial support being required from WYG.
Defined benefit schemes tend to guarantee pensions based on employees' earnings and length of service. There has been a shift towards defined contribution schemes, which are generally less generous to employees and therefore cheaper for employers. Companies which want to remove risk from their balance sheets have been closing defined benefit schemes to new members and transferring risk to specialist insurers.
The agreement also provides for the grant of an option to the scheme's trustees, enabling them to convert the transaction to a buy-out.
Such a move will completely remove the scheme from WYG's balance sheet and eliminate any remaining exposure to defined benefit pension liabilities.
"The scheme's trustees have indicated that they intend to proceed on this basis as soon as reasonably practicable with the aim of completing the buy-out during 2016. It is anticipated that this will result in there being a surplus in the scheme of up to GBP0.5 million which, in due course, will be returned to the group," WYG said.
Shares in WYG were up 4.3% at 135.00 pence on Thursday.
By Samuel Agini; [email protected]; @samuelagini
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