The journey to buyout – how a professional trustee can help


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Amid myriad challenges facing defined benefit (DB) pension scheme trustees, all boards must retain a focus on the long-term security of member benefits.

For some schemes this will mean achieving self-sufficiency, and for some the fledgling commercial consolidators will be appropriate. But for most, the pension insurance sector remains the gold standard for ensuring their members receive what they expect in retirement.  We have been at the forefront of new solutions for buyouts over the years.  We were the first trustee to undertake an all-risks buyout.  We have taken many schemes through buyout to wind up and as a result we have achieved our primary objective of securing members’ benefits.  In some cases, we have been able to provide benefits above those in the PPF and so removing the insecurity and worry being a member of an underfunded scheme of an insolvent employer.

The good news for DB scheme trustees is that the pension insurance sector has never been busier. Insurers have significant capacity to take on new schemes – and pricing is attractive.  In the past two years (2019/2020), an estimated £73bn worth of transactions have been completed through insurance buy-ins and buyouts. This was more than the total from the previous five years combined.

The COVID-19 pandemic presented some operational challenges for insurers, but most handled these smoothly, allowing schemes that were well prepared to take advantage of attractive pricing that was driven by swings in the bond markets.

Capturing the opportunities

Preparation is key to benefitting from the vibrant insurance market conditions – and this is where we can help. As a well-resourced and highly experienced team of professional trustees and governance experts, we bring our project management skills and knowledge to schemes.

As part of the trustee board, we can start the journey plan, support the other trustees so all parties understand the requirements and implications of an insurance transaction. This initial process will also ensure those with long-term knowledge of the scheme – whether our co-trustees, in-house staff, advisers, or administrators – are brought on board early on to retain their valuable experience.

Aligning the scheme’s investment portfolio with insurance company requirements is a key aspect of the journey plan. Analysing and cleaning up a scheme’s data is an important aspect of the insurance transaction and with the Pensions Regulator’s involvement, most schemes have started the process with common and conditional data reports. However, a good quality dataset with up-to-date member information can make a real difference to the speed and the cost of an insurance transaction.

Many DB schemes will have been grappling with the issue of guaranteed minimum pension (GMP) equalisation since the High Court’s rulings in October 2018 and November 2020. Reconciling this and dealing with any discrepancies will similarly reduce the cost of insurance. Our team has an in-depth knowledge of contracting-out rules and can help the decision making process on GMP issues and benefit audits.

Asking the right questions

It’s vital to get the right advice for a scheme and its unique situation. As professional independent trustees we have existing relationships with many advisers, which can help the process.

Our experience in the insurance market means we can help companies and trustee boards   on the right questions to ask your advisers and potential insurance providers. A buy-in or buyout process is not just about the transaction at the end: it is important to approach the project as a partnership with the insurer. Their team will want to be sure that it is taking on a well-run scheme that will not pose problems later down the line.

Our experienced and knowledgeable team is available full time to help make decisions swiftly and meet tight deadlines – often crucial in achieving a good price. We have expert knowledge from all areas of pension scheme management including legal, actuarial and investment, meaning you have all the bases covered when it comes to preparing a scheme for buyout.

Focus on what matters

There are many steps to take to reach an insurance transaction, each requiring time, resources, and effort from trustee boards. The work is worth it, though, to make sure members’ pensions are fully secured in perpetuity.

At Apex, we have the knowledge but also the understanding and experience to recognise the importance of focusing on the member experience and outcome. Giving all parties confidence in the buyout process is crucial, and we are well-positioned to do this – after all, we have done it all many times before, whereas lay trustees will probably only do this once.

We are a reputable, long-standing independent group of trustees and pension professionals with deep and broad collective experience gained over decades of working in pensions. We have dealt with numerous complex cases and cutting-edge issues. We are proactive in the resolution of issues and assisting with complex decisions.

Our team can work with both defined benefit schemes as well as defined contribution arrangements. We also have experience with open and closed schemes, schemes with complex regulatory and multidisciplinary issues, and schemes in wind-up or with an insolvent employer. We forge strong relationships with companies, trustees and advisers without compromising our fiduciary duties – allowing management the time to focus on their day jobs.  Whatever the challenges faced on buying out and winding up a- rest assured, we have done it all before.

Get in touch today to find out more.

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