Full buy-in for the Presbyterian Church of Wales Pension Scheme

Following a closure to future benefit accrual, our client of over 20 years was well positioned to consider longer-term options for providing benefits to their members. Helped by favourable market movements in 2022, they acted quickly to secure a £17m buy-in successfully.  

The positive, collaborative effort between BW (including actuarial, administration, investment, pension executive and management services, and risk transfer teams), the trustees, Church, and legal advisers at Eversheds Sutherland ensured a smooth and efficient journey from preparation to completion of the buy-in.

The scheme's journey

End of 2022

Market movements in autumn 2022 put the scheme in a favourable position to transact with a surplus, even after allowing for expenses. As the scheme was in the process of carrying out the triennial valuation, we fast-tracked updated calculations to refine the funding position using our indicative bulk annuity pricing model. We prepared a transaction readiness report and presented it to the trustees.

We delivered comprehensive training on bulk annuities covering:

• Background information on bulk annuities.
• Updated indicative bulk annuity and expense allowances.
• Insurer and market background.
• Main issues to consider.
• Process and next steps.

Once the trustees and Church agreed to progress the transaction, our investment team swiftly prepared a thorough investment strategy review. The focus was on evolving the scheme's portfolio to one ready for a bulk annuity transaction. The revised position aimed to move in line with general bulk annuity pricing, protecting the strong funding position.

As was normal practice for this scheme, our pension executive and management service team organised meetings between ourselves, Eversheds Sutherland, the trustees, and the Church. These meetings discussed whether the scheme should start its final preparations for a bulk annuity transaction and how to manage those activities.

Early 2023

Our risk transfer team helped kick-start the project by preparing a detailed, customised project plan. The plan included actions on data and benefits preparation, such as data gap analysis and preparing an insurer-friendly benefit specification. These actions progressed rapidly due to clear communication lines between our teams and Eversheds Sutherland.

With Eversheds Sutherland, we provided additional training to the trustees and the Church on the bulk annuity transaction process. Alongside this, discussions were held regarding the trustees' transaction objectives and selection criteria. Being a charitable sponsor, specific considerations were given to environmental, social and governance (ESG) matters and the insurers' policies.

Due to the size of the scheme and market demand, the trustees decided to work with an insurer on an exclusive basis. Our risk transfer team held discussions with insurers to obtain feedback on high-priority issues raised by the trustees. We presented this feedback to the trustees and Church, allowing them to select their preferred insurer, Just.

2023 and into 2024

Work was completed around Just's streamlined bulk quotation service. After receiving an initial indicative quotation that met objectives, a formal quotation was requested from Just. Our teams thoroughly reviewed the quotation, comparing it to our bulk annuity pricing model to ensure it aligned with market expectations.

We spent the next month working in tandem with Eversheds Sutherland to progress the scheme to a risk-controlled execution of the transaction. This included:

• Supporting Eversheds Sutherland with finalising the benefit specification.
• Agreeing on contractual terms.
• Working with Just to capture scheme-specific requirements.

Regular update calls were held with the trustees and Church to ensure they were well informed of progress over this busy period.

We also assisted the trustees in carrying out due diligence on Just by organising a Q&A session between Just and the trustees. This gave them the opportunity to receive direct responses to their primary concerns. Our insurance colleagues also provided an independent financial strength review of Just to support the trustees' due diligence.

Particular consideration was given to the investment transition. We worked with Just to agree on a bespoke price movement mechanism, allowing the scheme to control risks well during the transaction period.

The outcome

The trustees of the Presbyterian Church of Wales Pension Scheme secured a full scheme bulk annuity purchase with Just in a risk-controlled way. Administration matters were well-planned, ensuring a high level of member experience throughout the transaction period.

Our client praised our services, particularly those provided over the last two years, which led to this fantastic outcome for the scheme.

"Barnett Waddingham, led by Susanna Morran and David Moreton, have been our professional advisers for many years and they have provided at all times a first-class professional service. That quality has shone through during the project that we have recently completed where those qualities have been reinforced and demonstrated by Chris Hawley, Ben Collins and all of the members of the team working against a background of deadlines which have been met and ensuring that the project was completed on time."

"As we have come to expect from BW a highly professional, proactive and well managed service. We were navigated clearly and accurately throughout the project by the various teams from BW resulting in the time constrained project being completed on time and therefore securing the desired outcome."

"We are delighted to have worked collaboratively with Barnett Waddingham and to have been selected by the trustees to secure the benefits for the scheme members. It is particularly pleasing that the selection process included using our streamlined bulk quotation service (Beacon), strong focus on member experience, and agreeing bespoke requests resulting in all parties being comfortable with the end result."

Key skills demonstrated

• Identifying opportunities and reacting quickly.
• Adapting to market conditions.
• Testing competitiveness during exclusivity.
• Providing comprehensive Barnett Waddingham support.

This blog includes contributions from Ben Collins, Consulting Actuary