Stagecoach pension scheme switched to Aberdeen – Daily Business

Thousands of current and retired bus workers will see their pensions rise through an innovative deal struck between Stagecoach and the wealth manager Aberdeen Group.

Britain’s biggest bus operator is transferring its legacy defined-benefit (final salary) pension fund to the Edinburgh-based manager, into a fund with about £1.2 billion of assets.

It sees Aberdeen become the sponsoring employer of the Stagecoach Group Pension Scheme, which has over 22,000 members. Aberdeen will take on responsibility for the scheme’s funding as well as the management of the scheme’s assets.

The deal is structured so that it provides long-term security and inflation protection, with an initial pension increase of about 1.5% for all members.

Aberdeen will receive a minority share of any future distributed surplus and could lead to other defined-benefit pension schemes being passed to Aberdeen or other sponsors.

A particular benefit of the arrangement is that those who got no inflation adjustments in respect of pension entitlement for service before 1997, will now see an uplift in otherwise frozen pensions.

Aberdeen and Stagecoach said the surplus-sharing deal would boost benefits to members by more than £50 million, and by even more if a shift to higher-returning assets produces extra gains in future.

Jason Windsor, Aberdeen chief executive, called it “a landmark agreement that will deliver significant value to Stagecoach’s scheme members, and to Aberdeen.”

He added: “The scheme’s strong funding position allows Aberdeen to take on the responsibility for managing the fund and provides the opportunity to enhance member benefits by investing in productive assets.

“The agreement, which aligns with the UK’s goal of making pension capital work harder for the economy, brings £1.2bn in new assets under management and opens up new investment opportunities.”

PwC was lead adviser to the scheme trustee during the process, while Hymans Robertson led the strategic and investment due diligence on behalf of the trustees.

Stagecoach Group Pension Scheme trustee chair John Hamilton said: “Our objective was to consider what would provide the best pension outcomes for the scheme members.

“With a significant starting surplus in the scheme built up over many years and prospects for further sustained growth in the fund, our goal was to run-on the pension scheme to provide better inflation protection and higher pensions for our members using the scheme assets under secure funding arrangements.

“The trustee had a natural meeting of minds with the team at Aberdeen. Their experience of achieving similar outcomes for their own scheme, a belief in the need for growth and productive assets, and the recognised strength of Aberdeen’s pensions and investment teams, all meant we were able to develop an innovative solution to deliver improved pension outcomes for our members.”