Full scheme buy-in: finding bespoke solutions for clients

How meticulous planning and collaboration supported the trustees and sponsor on a full scheme buy-in.

Through careful consideration of the specific requirements of the scheme, BW teams worked together with the trustees and sponsor to successfully complete a full scheme buy-in. The trustees entered the buy-in transaction for £36m in Q1 2024.

Discover how we helped our client to:

• Navigate complex contractual matters by working closely with legal advisors
• Run a comprehensive, competitive quotation process
• Prepare data and benefits to gain traction in a busy bulk annuity market
   

The lay of the land

The scheme has been preparing for its journey to a potential bulk annuity purchase for some time. There was a strong partnership between the trustees and the sponsor supporting the scheme’s journey.

The latest actuarial valuation showed the scheme had achieved a milestone on its funding journey, being nearly fully funded according to the scheme’s funding basis. The estimated solvency shortfall was expected to be moving towards a zone attractive to the sponsor. Fuelled by market changes and a robust preparatory process supported by ongoing data and benefit activities, the position further improved.

The scheme’s journey

Work around the scheme’s data, benefits and investments had been ongoing as part of the overall journey plan for the scheme. This early preparation work helped prepare the scheme to move quickly when the time was right and provide certainty around the transaction cost.

The scheme was set up on our online funding tracker, Illuminate, which meant that the funding level was being monitored regularly – supplementing the actuarial valuation process. This helped keep all stakeholders informed on the financial position of the scheme.

Throughout 2023 

We provided bulk annuity training to the trustees and sponsor, including training on the transaction process to ensure all parties had the necessary understanding to make more informed decisions. We continued discussions with the trustees whilst progressing workstreams around affordability, transaction objectives and a potential selection criteria for choosing an insurer. This groundwork would prove invaluable to support decision making later in the transaction process. The trustees worked collaboratively with the sponsor and the advisers, moving forward very much as a ‘one team’ approach.

As we entered the second half of 2023, we worked with the legal advisers to complete the benefit specification and data projects to prepare for the approach to insurer market. Following a robust approach to market, competitive quotations were received from two insurers. Insurer templates had to be completed to achieve this outcome. It was a positive outcome for the scheme to achieve a multi-insurer process, given the market dynamics at this time.

We helped the trustees assess the insurers’ quotations against the agreed transaction objectives and selection criteria to allow them to choose their preferred insurer (subject to due diligence checks). The trustees had a strong desire to reduce risks around the transaction - this in part led to them choosing a higher priced quote noting it could reduce risks sooner than the alternative.

2024 and beyond

The trustees carried out due diligence on their preferred insurer. In the first few weeks of 2024 we worked closely with the trustees’ legal advisers to support their work on the insurer benefit specification and contractual terms. We also worked with them to manage member experience by producing clear member communications, as this was a key concern of the trustees.

We project managed the entire process and chaired weekly update calls with the trustees, sponsor, and legal advisers. We also held a kick off implementation call with the insurers administration team to ensure minimal impact on member experience.

Our administration team is currently working with the chosen insurer to embed new administration processes, ensuring a smooth transition for members. We are also continuing to support the trustees with post-transaction activities, such as Guaranteed Minimum Pension (GMP) equalisation.

An ideal outcome

The trustees secured a full scheme bulk annuity purchase with a leading insurer on terms that were reflective of their specific requirements and at a price which met the requirements of the sponsor.

Despite the scheme size in the busy market, we worked with the trustees to achieve a competitive process with two insurers formally submitting a quotation - we narrowed down the selection of insurers to optimise the engagement of participants. 

The process involved the trustees deciding on a number of financial and non-financial considerations, resulting in the selection of an insurer with a higher premium. This decision was due to several areas where the preferred insurer was felt to be better aligned with the specific requirements of the trustees and sponsor. A key area was around reducing risks involved with the transaction and we supported decision making with some investment modelling. 

The process had to be structured around the governance requirements of the sponsor and timelines of corporate meetings – the trustees engaged well with the sponsor and took their time to make the right decision. 

Key achievements 

We successfully project managed a multi-stream complex project, whilst navigating specific governance requirements throughout the process. 

• Strong collaboration

Throughout the process, we provided a fully joined-up service on a ‘one team’ basis – including a close working relationship with the legal advisers. There were also some specific contractual matters that needed to be negotiated and bespoke solutions developed with the legal advisers, which we navigated successfully. 

• Comprehensive quotation process

We ran a robust competitive quotation process resulting in a strong outcome for our client – we listened carefully to their requirements and took account of their transaction objectives when seeking a low-risk process with a well-respected insurer. There were also some inconsistencies in the insurer proposals – helping them to understand and navigate these differences was key to helping the trustees find the right insurer for them. 

• Discovered innovative solutions

With hard work and commitment, we found a solution which was bespoke for the client and their situation. 

• Gained traction through data and benefits 

We prepared the data and benefits well, which enables us to gain traction in a busy bulk annuity marketplace. We also navigated the changing requirements of an insurer around the format of the data and benefits information. 

Familiar challenges?

If you're interested in finding out more about how our experts can help you navigate your risk transfers and leverage market opportunities, please contact Chris Hawley or read about our Risk Transfer services.