Aberdeen Group plc, an investment manager with over £200bn of assets under management for pensions, insurance and other institutional clients, has agreed to become the sponsoring employer of the Stagecoach Group Pension Scheme (SGPS).
The strategic move will benefit the scheme’s 22,000 members and marks an important step in Aberdeen’s growing role in managing defined benefit pensions.
SGPS, which has a large financial surplus, will continue to operate in a “continuous operation” mode. This ensures long-term financial security, enhances inflation protection and provides all members with an initial pension boost of approximately 1.5%, equivalent to an immediate distribution of more than £50 million from the scheme’s surplus. The arrangement also opens the door to potential future growth for members by allowing investment in productive assets.
Aberdeen will assume the scheme’s financing obligations and manage its £1.2bn assets. While Aberdeen will receive a minority share of any allocated surplus, the majority will remain with scheme members, with strict safeguards in place to protect the financial health of the scheme. The strong funding position means this commitment will not have a material impact on Aberdeen’s capital.
For members, the agreement brings better inflation protection through higher caps, an initial 1.5% rate increase and the possibility of further rate increases linked to plan performance. The agreement also strengthens Aberdeen’s investment platform by leveraging its expertise in private markets, infrastructure, real estate and private credit, and aligns with wider UK policy objectives to deploy pension assets more efficiently.
Jason Windsor, Aberdeen Group Chief Executive, said: “This is a landmark agreement that will deliver significant value to Stagecoach scheme members and Aberdeen. The scheme’s strong financial strength enables Aberdeen to assume responsibility for managing the fund and provide the opportunity to enhance member welfare through investment in productive assets.”
“This agreement is consistent with the UK’s ambition to make pension capital work harder for the economy, bringing £1.2bn of new assets under management and opening up new investment opportunities. We believe in the continued model of well-funded schemes and we have already adopted this approach across our own schemes.”
John Hamilton, chairman of the SGPS trustees, added: “Our aim is to consider how to deliver the best pension outcome for scheme members. As the scheme has accumulated a substantial initial surplus over the years and there are prospects for further sustained growth in the fund, our aim is to continue to run the pension scheme to provide better inflation protection and higher pensions for members who use scheme assets under secure funding arrangements.
“The trustees aligned naturally with the Aberdeen team’s ideas. Their experience of achieving similar outcomes in their own schemes, their belief in the need for growth and productive assets, and the recognized strength of Aberdeen’s pensions and investments team, means we are able to develop innovative solutions that deliver better pension outcomes for our members.”
Stagecoach Group Chief Financial Officer Bruce Dingwall concluded: “We are pleased to have supported the trustees in assessing the best options for the scheme and have achieved a strong funding position. We are delighted that these arrangements enable members to benefit from a strong sponsor and look forward to further improving benefits over time. For Stagecoach, this transaction allows us to move away from a large defined benefit pension scheme, which supports our aim to simplify the business.”