From challenge to success: Securing a full scheme buyout

When the trustee of a defined benefit (DB) pension scheme faced a challenging combination of financial uncertainty and corporate restructuring, they turned to us for expert guidance. 

Over two years, we helped the trustee navigate complex circumstances to secure a buyout and scheme wind-up that provided long-term security for members. This is the story of how collaborative problem-solving and meticulous planning led to a positive outcome.

A complex challenge

The scheme’s sponsoring employer was undergoing a significant corporate restructure, introducing material risks to the covenant. At the same time, the trustee sought to seize a fleeting opportunity in the insurance market to secure the scheme’s liabilities at a competitive price. The situation demanded precision, speed, and confidence in decision-making, with key objectives including:

• Achieving a competitive buyout to protect members’ benefits.
• Ensuring data and benefit accuracy to secure price certainty.
• Completing the buyout and winding up the scheme efficiently.

Our proven expertise in bulk annuities and risk management made us the ideal partner for this complex journey.

Tailored solutions for a unique situation

We developed and implemented a holistic strategy to address the scheme’s challenges and objectives. Early in the process, we identified a critical pricing window, allowing the buy-in to proceed when affordability was optimal. Through a four-month preparation phase, we worked closely with the trustee and sponsor to align priorities and ensure readiness for insurer engagement.

Accurate data was pivotal to the project’s success. We conducted a rigorous validation exercise to provide confidence to insurers and secure a robust premium. At the same time, we constructively challenged the scheme’s fiduciary manager to reduce investment risks and used a price-lock mechanism to manage execution risks effectively. Funding and liquidity advice ensured the scheme’s resilience, even as sponsor support was delayed.

The implementation process was streamlined for efficiency. Our team agreed the buy-in policy terms and aligned the insurer’s implementation processes to support a rapid transition from buy-in to individual policies. Detailed project management, including regular updates and proactive risk mitigation, kept the project on track and ensured milestones were met.

A remarkable outcome

In just two years, the trustee achieved a full scheme buyout and wind-up, providing exceptional results:

• The scheme’s liabilities were secured with an insurer at highly competitive pricing.
• The buyout was completed within seven months of the buy-in, and the scheme was wound up four months later.
• Members’ benefits were fully secured, eliminating reliance on the sponsor.
• Despite the complexities of the sponsor’s corporate restructure, the project stayed on track, demonstrating the strength of our approach.

Reflections from key stakeholders

"Working with Barnett Waddingham for many years to get the plan to this stage has been excellent. For this project, Rosie Fantom and Tom Hill delivered advice clearly and concisely to enable the trustee to understand the project and make informed decisions on behalf of the members. Tom has managed the project extremely well from the outset throughout the buy-in transaction and has helped us be able to wind up the plan in the quick timescales required. I would recommend Barnett Waddingham to oversee the transaction journey for any trustees looking to buyout and wind-up a pension scheme."

"Securing these liabilities and buying out the scheme represents a real achievement, meaning that members are no longer reliant on the sponsor for their benefits. This brings a positive end to the scheme’s 25-year journey, with Barnett Waddingham working alongside the trustee throughout. Completing the buy-in during turbulent times for the sponsor was a real achievement, and then using the solid preparations to move to individual policies so quickly is remarkable: it shows the power of what true teamwork and a holistic approach can bring."