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UK wine retailer First Quench in $242 million pension risk deal

By Sarah Mortimer

LONDON (Reuters) - British alcoholic drinks retailer First Quench is insuring a chunk of its pension liabilities with specialist provider Pension Insurance Corporation, improving retirement benefits for its 1,966 members.

A growing number of "final salary" pension schemes are running into trouble because of rising longevity and low UK government bond yields.

Insurers and reinsurers are capitalizing on increased demand from pension funds for ways to manage their liabilities by underwriting individual pension funds and charging a fee.

Pension Insurance Corp said on Wednesday it would assume responsibility for managing some of the of pension liabilities held by the trustees of the First Quench fund - amounting to 160 million pounds ($242.26 million).

Unable to pay the final-salary linked pensions of its members, First Quench - which operates the Threshers and Wine Rack brands - relinquished its debt to the Britain's Pension Protection Fund (PPF), in October 2009.

The PPF was launched in 2005 to take over the assets and liabilities of UK-based defined benefit pension schemes if an employer goes bust. It currently has around 15 billion pounds of assets under management, which it expects to rise to over 21 billion pounds in 2016.

The PPF caps the amount it pays out to members of insolvent schemes but Chris Martin, managing director of Independent Trustee Services Limited, said First Quench members should receive more money than if they stayed in the PPF scheme.

($1 = 0.6604 British pounds)

(Reporting by Sarah Mortimer; Editing by Louise Heavens)

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