TT Electronics plc (LON:TTG), a global provider of engineered electronics for performance critical applications, has announced that it has completed a buy-in of all its UK defined benefit pension liabilities giving an immediate £6 million cash flow benefit.
The Trustee of the TT Electronics Pension Scheme (the “Scheme”) has purchased a bulk annuity insurance policy from Legal and General Assurance Society Limited (“L&G”), covering all liabilities required to pay all future defined benefit pensions for the Scheme’s circa 5,000 members and any eligible dependants.
The purchase of this insurance policy is the successful culmination of extensive work over the last few years by TT and the Scheme Trustees. The insurance policy has been purchased using existing assets held within the Scheme, without the need for TT to make any additional contributions.
TT will not be required to make any future contributions into the Scheme regarding defined benefit liabilities and the buy-in delivers greater security to the Scheme’s members. The Scheme’s circa £400 million of liabilities are now matched by the insurance policy, and TT no longer bears any investment, longevity, interest rate or inflation risk in respect of the Scheme.
There will be an immediate benefit to the Group’s current year cash flow of £6 million and an equivalent annual improvement to free cash flow in future years.
The pension benefits that Scheme members will receive in the future are almost entirely unaffected by this transaction.
Mark Hoad, TT Chief Financial Officer commented:
“This transaction is an excellent outcome for our defined benefit pension scheme members, TT and our shareholders. We have worked hand in hand with the Scheme’s Trustee over the last few years to reach this position. Those efforts, combined with excellent stewardship by the Scheme’s Trustee Directors, has meant that the Scheme can now be fully de-risked for the benefit of members and the Group.
Importantly, the successful execution of this transaction means there will be a significant increase in TT’s annual free cash flow.”