Abrdn has announced plans to use funds from its "significant" defined benefit (DB) pension scheme surplus to fund the cost of providing defined contribution (DC) benefits to current employees, as it also confirms plans to change its company name back to Aberdeen Group.

The group's annual results revealed that it has recently reached an agreement with the trustee of its main DB pension plan to unlock the plan’s surplus for the benefit of both the company and DB plan members.

The agreement, which is one of the largest of its kind, is designed to enable Abrdn’s DC contributions to be funded from the DB surplus, while largely maintaining the surplus and maintaining future optionality, such as an insurance buyout.

Indeed, the group confirmed that DB members will benefit from enhanced pension entitlements and guardrails to ensure the continuing financial strength of the plan.

The changes are expected to result in an annual benefit to net capital generation of about £35m from July 20251.

The agreement also includes a modest increase to the target level of investment return, which is intended to "open up" the possibility for a broader range of investments, including private as well as public market assets.

Abrdn said that the agreement was made possible due to the plan’s strong long-term investment performance, delivered by Abrdn Investments’ pension solutions and liability aware investment teams.

The group was advised on the plans by Slaughter and May, Pinsent Mason, Willis Towers Watson and PwC, while the trustee was principally advised by Shepherd and Wedderburn, Hymans Robertson and Isio.

Commenting on the plans, Aberdeen Group CEO, Jason Windsor, said: “I’m delighted that we have unlocked the significant value of surplus assets in our DB pension plan.

"It’s particularly pleasing that the strong investment performance of abrdn Investments has generated a surplus that we expect can fund the company’s DC contributions for the foreseeable future whilst enabling continued protection and pension enhancements for DB members.”

Adding to this, BESTrustees professional trustee and trustee chair, Christopher Wheeler, said: “I’m pleased that the collaborative way of working across trustee and company has continued to deliver strong mutually beneficial outcomes.

"Under the arrangements being announced, DB members will benefit from enhancements to their pension entitlements whilst continuing to enjoy the security of an exceptionally well-funded scheme.”

In addition to this, the group confirmed that it will be changing its company name to Aberdeen Group, although it does not intend to make any changes to its subsidiary legal entity names or the names of our underlying funds at this time.

"This is a group to be proud of, with a promising future. We will deliver by looking forward with confidence and removing distractions. To that end, we are changing our name to Aberdeen Group plc," Windsor stated.

"This is a pragmatic decision marking a new phase for the organisation, as we focus on delivering for our customers, people and shareholders."

This article was first published on our sister website, Pensions Age.

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