In 2010 and 2012, the Next Group Pension Plan completed buy-ins for its pensioner liabilities, which made up nearly a quarter of its total plan liabilities.
In order to convert these buy-ins to a buy-out, Next established a new plan for existing members whose benefits are not insured through the buy-ins. This new plan has £512.6m in assets and £431.5m in liabilities, while the original plan has approximately £155m in assets which exactly match the liabilities retained in the plan.
A spokesperson for Next confirmed that the split has not affected the employer’s contributions or the original scheme funding level.
The company intends to buy-out the benefits matched by the insurance contracts in the original plan and will then dissolve the original plan altogether, according to their 2014 annual report.
The concept of creating a new plan to enable buy-out is something that other employers with similar scheme rules are starting to look at with interest, due to its benefits for employer accounting.