04 September 2008
The Cable & Wireless (C&W) pension scheme has struck a
deal with Prudential to guarantee the pension payments of its 5,000
pensioners. C & W has done this by buying a £1 billion
annuity from them, half of the scheme's assets. The deal covers the
pensioners of the C & W Superannuation Fund, a UK final salary
scheme now closed to new members.
The bulk annuity policy from the Prudential now guarantees to
supply the cash needed to make all the payments expected by current
pensioners.
The scheme still retains the ownership of the remaining £1
bn of assets which it will continue to invest to pay the pensions
of the 9,000 deferred members (staff who have left the company but
not yet retired) and the 1,000 employees who are still paying into
the scheme.
The advantage for C&W and its pension scheme are that the
risk of poor investment returns in the future, or of pensioners
living longer and longer than expected, have been transferred to
the Prudential in return for the £1 billion payment.
"There is no question of offloading the pensioners - it's about
increasing their security and reducing risk," explained Steven
Dicker of the actuaries Watson Wyatt, who advised the C&W
pension scheme trustees.
