LawDeb Connected

The second webinar in our LawDeb Connected event series looked at Buy-in/Buy-Out for our clients. Hosted by Vicky Paramour, Managing Director of LawDeb Pensions and Sankar Mahalingham, Director of Pegasus, a number of the LawDeb and Pegasus team members shared their experiences of delivering buy-in/buy-out for our clients. Through these case studies Trustee Director Elizabeth Hartree, Head of Corporate Sole Trustee Scott Pinder and Senior Pensions Executive Mark Williamson delivered practical guidance. Some key takeaways are:

Work with the scheme sponsor:

Whilst the Trustees typically have the power to make decisions, quicker progress can be made if the sponsor is on board and trustee and sponsor are working collaboratively.

Plan early to move quickly:

• Going to market, what matters most is the ability to move in a particular timescale, price ability to take on assets in specie, working with a household name etc.  Set out your ultimate objectives and journey plan in advance to avoid delays which would mean you miss opportunities.
• Poor data cleanliness can cause delays, and make you less attractive to insurers. Ensure any data work required up front is completed, benefit specs prepared and that resources are in place to move quickly.   

 The right governance framework is key:

• Whilst the needs of each scheme differ, having a Corporate Sole Trustee (CST) in place can help ensure things move more quickly and decision making processes are robust.  A CST team, as at LawDeb, is experienced, knows to ask the right questions, anticipates and mitigates challenges early. CST, done right, is a team approach meaning access to a wide set of skills and experience.
• For schemes which don’t have CST, sub-committees can tackle the incremental decisions with the strategic decisions being passed to the full board. This supports agile decision making.

Get the right advisers in place:

• Ensure all advisers are aware of the ultimate goal, know their role on the project and have input into the planning up front to ensure realistic expectations are set.
• Independent project management support, such as that offered by Pegasus, or provided by a pensions manager if they have capacity, to hold advisors accountable is key to support this.
• Combined decision papers from advisors (i.e. actuaries and lawyers) can also help speed up decisions. 

As more schemes find themselves closer to buy-out, getting yours in the best position for success requires foresight and planning. At LawDeb we have extensive experience delivering buy-ins and buy-outs for schemes of all types and size. We have delivered over a 100 transactions. This includes the largest in the market of over £4bn which was announced last week. This experience spans both trusteeship and pensions executive services, so do reach out to Nicole Weiner if you have any questions about the process, or are considering what the most suitable endgame solution is for your scheme.

We have summarised the key takeaways below.  

Run on case study – Mike Jaffe;

• Size of scheme is likely to be relevant to have enough scale and governance support to run on
• Employer covenant needs to be demonstrably strong
• Ideally the scheme will be well funded and have a carefully considered investment strategy
• Use of surplus to remove benefit inconsistencies and provide DC contributions are likely motivations for Trustees and Company
• Requires careful thought and considered advice

 Buy-in case study – Paul Wales;

• Collaboration between Trustees and Company is the key to success
• Good preparation – ensure you have everything in place including all stakeholder approvals
• Strong project management – manage competing deadlines and expect things to come out of the woodwork
• Good advisors and professional trustees who can challenge pricing and manage competitive tension with insurers
• You might start with a strategy to run-on but everything can change once reach 100% funded versus buy-in.

We have also identified areas in common whether you decide to go down the run on or buy-in/buy-out route;

• Consider scheme rules; balance of power, application of surplus, differences in benefits between sections, …
• Ownership and use of Surplus – how can this be shared fairly among the parties
• Relationship between Company and Trustees – good dialog and trust
• Resourcing – do you have the expertise and manpower to get the work done