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FOR IMMEDIATE RELEASE
14th March 2008
Aga Foodservice Group plc (the Principal Employer under the Scheme) and AFG Pensions (1974) Limited (the Trustee of the Scheme) have today announced the following:
Aga Foodservice Group plc (“Aga”) and the Trustee of the Aga Foodservice Group Pension Scheme (“the Scheme”) have reached agreement on a long-term funding and investment strategy.
The principal features of this agreement are:
- The Scheme will continue to be operated by Aga and administered by the Trustee of the Scheme. This means that:
- The Trustee of the Scheme will continue to be responsible for collecting contributions from members and employers, investing the Scheme’s assets, and paying benefits to members and beneficiaries;
- Aga will continue to be responsible for meeting the balance of the expected cost of providing the Scheme’s benefits, on the basis of advice from the Scheme’s actuary, by providing appropriate guarantees or cash contributions.
- Whilst the Scheme is well funded on a number of measures (and indeed Aga paid £14.5 million of additional contributions into the Scheme in 2007), the long-term goal of Aga and the Trustee of the Scheme is to reduce as far as reasonably practicable the circumstances in which the Scheme might require unexpected additional support or funding from Aga.
- To achieve this goal, Aga and the Trustee of the Scheme have agreed to strengthen further the Scheme’s funding position on a specified, progressive basis over a specific period of time.
The details of this agreement include the following:
- The agreed intention is to reach the target funding position by 2020, with agreed milestones in 2011, 2014 and 2017.
- Aga has also agreed to provide the Scheme with £50 million in bank guarantees, lasting until 2020, in support of its financial obligations to the Scheme (this is an increase on the bank guarantees of £22.5 million currently in place, which would have expired in 2012).
- The Scheme will remain open to future accrual on a defined benefit basis, for existing defined benefit basis members while they are in service with a participating employer under the Scheme (and have not opted out), until at least the end of 2010.
- In the event that a surplus arises on the agreed funding basis in 2020, a proportion will be made available to increase the benefits of Scheme members and beneficiaries.
In return for these improvements, the Trustee of the Scheme has agreed that:
- Aga may return an additional £60 million (from the proceeds of the sale in December 2007 of the Aga Foodservice Equipment business) to shareholders (over and above the £80 million distribution previously agreed as part of the sale.)
- A defined proportion of the Scheme’s assets will normally remain invested in growth assets including equities, property, and alternatives, until 2020.
As with most pension schemes, the setting of a particular funding target does not guarantee that Scheme members’ benefits will be met in all circumstances. However, Aga and the Trustee of the Scheme believe that the agreement improves the security of members’ benefits in a wide range of circumstances.
In relation to this agreement, Aga was advised by KPMG LLP Pensions and Allen & Overy LLP, and the Trustee of the Scheme was advised by Watson Wyatt Limited, Clifford Chance LLP and Grant Thornton UK LLP.
“The agreement balances the interests of all parties, and produces a long-term framework within which to work and provides clarity on how we see the future relationship with the Scheme evolving.” : William McGrath, Chief Executive of Aga.
“We see this long-term agreement as one more logical step in both strengthening the position of the Scheme and bringing more certainty to its future funding which is in the interests of all of the Scheme’s members and beneficiaries – pensioners, deferreds and actives.” : Tony Bagshawe, Chairman of the Trustee of the Scheme.
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Enquiries:
William McGrath, Chief Executive, Aga Foodservice Group plc - 0121 711 6015
Simon Sporborg/Charlotte Kenyon, Brunswick - 020 7404 5959
Notes to Editors:
The Aga Foodservice Group Pension Scheme (originally named the Glynwed Group 1974 Pension Scheme) was established in 1974 for employees of the Glynwed Limited (now named Aga Foodservice Group plc) group of companies.
The Scheme currently has around 15,000 members, of which around 1,000 are active members.
The Scheme had assets of over £0.75 billion, and liabilities valued under IAS 19 of under £0.7 billion, as at 31st December 2007.
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