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(Alliance News) - Tate & Lyle PLC on Thursday said it has entered into a pension buy-in agreement with a unit of Legal & General Group PLC which will save GBP20 million annually.
London-listed shares in the company were down 1.5% at 735.60 pence each in morning trade.
The food and beverage ingredients supplier has signed a GBP930 million bulk annuity insurance 'buy-in' with Legal & General Assurance Society Ltd, providing certainty and security to the company's pension scheme members, with savings to be felt from the year ending March 2021.
Tate & Lyle said the agreement secures an insurance asset from Legal & General that fully matches the remaining pension liabilities of Tate & Lyle Group Pension Scheme, with the company no longer bearing any investment, longevity, interest rate or inflation risk in respect of the scheme.
Under the transaction, Tate & Lyle will not contribute any incremental funding to the scheme.
The agreement is not expected to impact the company's pretax profit for the the year ending March 31, 2020, but will eliminate non-cash net finance income on the UK scheme accounting surplus from the 2021 financial year. De-recognition of the surplus will result in a decrease in the company's net equity by around GBP180 million.
"This transaction represents a good outcome for our UK scheme members, the company and our shareholders. Importantly, cash contributions into the scheme will cease, saving around GBP20 million of cash annually from the 2021 financial year, allowing the company to focus our future investments on delivering profitable growth," said Tate & Lyle Chief Financial Officer Imran Nawaz.
