The task

We recently supported a multi-billion £ pension scheme in securing their first buy-in transaction, which not only achieved attractive pricing but also incorporated a member options exercise.

This case study highlights the importance of setting a clear long term objective and how completing a buy-in can support you in reaching that ultimate goal.

The process

The Trustees and Company agreed that buy-out was the appropriate target. We supported them in developing a strategy to bridge the gap which balanced the needs of both parties – including a desire to de-risk and manage any corporate accounting impact.

Their strategy included a combination of opportunistic buy-ins, member engagement and investment returns.

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The Trustees wanted to move quickly to:

• Communicate with pensioners to offer a Pension Increase Exchange (PIE) option; and
• Take advantage of attractive buy-in pricing.

We supported them in balancing these two projects in parallel to achieve a ground-breaking transaction which met the needs of all parties at a price which moved the Scheme nearer to their ultimate buy-out objective.

The Trustees set insurers a challenging target price for a buy-in transaction. The target was aligned to the long term objective and this clarity of process led to high insurer engagement in a busy market.

At the same time, the Trustees communicated with pensioner members included in the buy-in population giving them the option to take a PIE. Insurers were made aware of this exercise at the outset and asked to incorporate any changes based on actual take-up following the transaction.

The results

Following a competitive process, the Scheme secured pricing even better than their price target and we negotiated a bespoke approach to ensure the PIE exercise was incorporated on the same favourable terms.

This case study will have similarities to many other pension schemes wishing to juggle multiple projects and not miss out on attractive buy-in opportunities. It highlights the benefits of planning in advance and setting a clear objective.

In this example, the Scheme continues to track progress towards their objective and following recent positive experience, have implemented a price monitoring process to allow completion of a subsequent buy-in when insurer pricing meets their target.