UK Roundup: Apollo Strikes Funding Deal With RPC Pension Funds

Private equity firm Apollo has agreed a funding package worth roughly £90m (€104m) with the trustees of pension funds sponsored by packaging company RPC, which it is set to buy this year.

Apollo Global Management agreed a £3.3bn deal to buy RPC on Wednesday.

In an announcement to the stock exchange yesterday, Apollo said it had entered into a memorandum of understanding with the trustees of the British Polythene Pension Scheme (BPP) and with the M&H Staff Pension Plan regarding funding arrangements post-acquisition.

The private equity group was also in “advanced negotiations” with the trustees of the the RPC Containers Limited Pension Scheme, it said.

For BPP, Apollo has pledged annual contributions of £3.8m a year for eight years, increasing annually in line with inflation.

Additionally, the scheme has been granted contingent property assets worth £40m “reducing in line with the additional cash contributions… to £25m by 2027”. Apollo also pledged a parent company guarantee of up to £20m.

“The trustees of the BPP scheme have confirmed that, having regard to the information and mitigation provided, the acquisition is not materially detrimental to the security of members’ benefits under the BPP scheme,” Apollo stated.

For the M&H scheme, Apollo had earlier this week stated that the memorandum of understanding would mitigate the impact of the acquisition “through the exclusion of the employer from the debt security package and a £10m guarantee from M&H Group Limited”. 

According to RPC Group’s 2017-18 annual report, its UK pension schemes had combined assets of £511.5m, and total liabilities of £607.3m as of 31 March 2018.

XPS reassures on GMP costs

The cost of equalising guaranteed minimum pensions (GMPs) will be less than 1% of liabilities for more than half of UK pension schemes, according to analysis from XPS Pension Group.

Initial estimates had put the total cost to the pension industry of implementing October’s court ruling at between £15bn and £32bn, depending on accounting methods.

However, a survey of 90 of XPS’ defined benefit scheme clients found that more than half would see their total pension obligations rise by less than 1%.

The research chimes with data gleaned from company annual reports by IPE, which showed that of 10 company pension funds to have published estimates, most expected total costs of less than 1% of liabilities.

Wayne Segers, head of transactions at XPS Pensions Group, said: “This is good news for employers and shows the value of getting a robust estimate that takes into account the specifics of their schemes.

“However, it appears to confirm a worry that the industry may now incur significant cost and administrative complexity with little real benefit for members. Given that, it is important schemes use the work needed on GMPs to drive improvements.  

“Increasing data quality, streamlining benefits and removing GMPs for good can all help reduce cost and risk for employers, and help drive better options and outcomes for members.”