Case Study: CST for efficient move to buy-in

Driver(s) for change

• Since the decision to close the scheme to future accrual, the sponsor had been seeking to simplify the scheme’s governance
  The scheme was viewed as a legacy obligation and no longer as a means of incentivising staff
• The demands placed on the lay trustees in an increasingly complex environment were recognised
• The advantages to the sponsor of streamlined governance, in terms of the provision of considered and well-documented advice at reasonable cost on a timely basis, was also important
• The recognition that a knowledgeable professional corporate sole trustee would be particularly appropriate in helping secure the scheme’s liabilities through a bulk annuity contract

Key challenges

• Initial reluctance of trustees to resign plus trustees (especially the MNT’s) wanted to retain their involvement in the running of the scheme
• Ex-trustees concerns with future indemnification

LawDeb Solutions 

• The establishment of a Consultative Committee with a broad monitoring role was key to allaying the concerns of the trustees. The Committee was made up of members of LawDeb Pension Trustees, the company’s Pensions Manager, one of the retired MNTs and another person not previously involved with the scheme.
• Streamlined governance- the scheme’s advisers had been rationalised and the division of responsibilities between the company, advisers and LawDeb Pension Trustees agreed.  This realignment led to more efficient and cost-effective governance which provided a structure able to negotiate the steps necessary for a buy-in of the scheme’s liabilities.
• Move to buy-in:
  • within six months of the switch to CST indicative buy-in quotations were obtained from three insurers
  • LawDeb worked with the sponsor to select a deal manager for the transaction, to advise on whether the pricing was at least as good as could be achieved by way of competitive tender, and then to bring together a successful transaction quickly
  • An exclusivity agreement with the insurer was signed and a further reduction to the premium negotiated
  • A buy-out was concluded once the data reconciliation and confirmation of the terms for benefit equalisation were finalised and cost