But there is already a backlash from those who want to diminish those who have engineered this deal to a cartoon. This post has been liked by the insurance lobby.

Aberdeen is taking over the Stagecoach Group Pension Scheme as sponsoring employer. For the last twenty years the direction of travel has been the opposite, corporates de-risking and passing schemes to insurers. Here an asset manager is taking on another company’s DB liabilities.

It is even more interesting given Aberdeen’s own history. Aberdeen used to be Standard Life, my old employer, with a large life and pensions business and a deep bench of actuarial and risk expertise. When the insurance business was sold to Phoenix, the liability and capital heavy part of the group moved with it. As an asset manager with pensions heritage it is a logical place to try this model. For another asset manager without that background, it would be much harder.

I do not see this as the start of a new trend. We have been here before. There was a great deal of excitement around superfunds a few years ago, and that market never took off on any meaningful scale. The regulatory, capital and governance hurdles proved to be far larger than the early commentary suggested.

My question here is around capability and security. Looking after DB liabilities requires actuaries, liability modelling and funding expertise, not just an investment platform. To what extent has Aberdeen rebuilt that in house, or is it largely outsourced.

There is also a clear difference in member protection. Insurers operate under Solvency II, are subject to PRA oversight and must hold capital against a one in 200 stress. A corporate run-on model is not in that regime. It relies on covenant strength and trustee governance rather than regulatory capital.

Stagecoach’s 2023 annual report notes that a full buyout would have cost the Group substantially more than the liabilities shown in the accounts, so a straightforward buyout was unlikely to be affordable. This arrangement shows what is possible when a scheme is well funded but not in buyout territory. It will be interesting to see how the model performs in practice and how trustees weigh these options against the security of the insurance regime.

Not investment advice.
hashtag#Aberdeen hashtag#Stagecoach hashtag#FTSE hashtag#pensions hashtag#insurance

This is the start of the backlash.

This stagecoach appears to be facing south to buy-out. The cartoon suggests it will have to be dragged backwards to Aberdeen.

I know people who were around when Stagecoach was getting going and they remind me that its DB scheme, nearly 40 years ago, was administered and invested with Standard Life.

But that did not last long and ever since the pension scheme has grown outside the management of insurance companies. Recently it has toyed with “buying out” as this cartoon and the article that accompanied it on Linked in suggests it should. Notice the direction the happy bus is pointing.

“Stagecoach’s pension will need to be dragged to Aberdeen backwards“, says the cartoon. Presumably without the smile.

Perth (where Stagecoach is based) is south of Aberdeen but the insurance companies are down south. Stagecoach’s pension is heading north in being independent, though Aberdeen is still a huge British company with reach all over the world.

Stagecoach selling itself to insurance (together with its £260m surplus that would mostly have been swallowed up) has been a tasty prospect for insurers for a couple of years. No buy-out of a scheme managed passionately by trustees for members is going to be easy. I imagine there have been rigorous discussions between the Stagecoach trustees , executives and shareholders and I don’t suppose that changing sponsor to Aberdeen was easy.

The truth is that the insurance lobby has sat on superfunds since they were announced eight years ago so that the only superfund (Clara) is a waiting room for buy-out. They have sat on capital backed journey plans (Punter Southall’s , Pension Superfund’s and several other nascent capital backers have done no business). The Pension Regulator have allowed the swap (a sign of a change from employer covenant conservatism) and it is now possible that schemes looking to run on – will be able to follow Stagecoach- knowing that insurance companies can be avoided.

Nobody who has followed the intricate dance between Aberdeen and Standard Life  and Standard Life’s investments can see the irony that Stagecoach has now transferred the sponsorship of its 22,000 strong pension scheme to the uninsured Aberdeen with an investment grade bond rating that is quite independent of the life company Standard Life.

I would like to see bus companies working together for the benefit of bus-workers who move from bus-company to another as contracts move. I hope that for actively working staff, saving for retirement, a new member-focussed pension scheme can be developed. Bus companies are not towards buy-out but towards member friendly strategies.

The Stagecoach trustees have a history of getting it right and anyone who thinks they will be any less active in ensuring the continued profits flow to members , had better get to know John Hamilton and his co-trustees. This has been approved by TPR with oversite from the FCA. LCP, Hymans and PWC have been the principle actuarial advisers. Slaughter & May, Allen & Ovary and CMS have been the principle lawyers.

The idea that this is “comic” is an insult to all those who have been involved in getting his deal done.

This is not just a landmark for pensions, it is a landmark for members, their unions and the corporates involved. The trustees have led the way but this is a change in sponsorship that has suited everyone but the insurers.

You know it is a landmark, by the backlash.