The Findel Group Pension Fund is a defined benefit pension scheme comprised of four sections. Barnett Waddingham has provided actuarial and investment advice to the Trustee of the Fund since March 2013, as well as providing administration services. The Fund secured a full buy-in on an accelerated basis in March 2022.
Over the past nine years, Barnett Waddingham has worked closely with the other Trustee advisers such as the legal advisers (Pinsent Masons) and the covenant advisers (FRP Advisory), as well as the employer and its advisers. There has been excellent collaboration, acting as one team for the good of the Fund.
The Findel Fund is one of several transactions that Barnett Waddingham has supported in recent times, including a £6.6 million full-scheme buy-in with Gordonstoun School Retirement Benefits Scheme. The bulk annuity market continues to be busy, but in our view it is possible for schemes of all shapes and sizes to gain traction in the market provided they are well prepared and the right approach is taken to market.
"The work Barnett Waddingham have carried out over the years has been fundamental to allow the Fund to move to the milestone of the transaction with Standard Life. What has consistently impressed the Trustee directors is the joined-up nature of the team across actuarial and investment advice as well as the administration role and more recently their specialist bulk annuity team. The project took a few unexpected twists and turns and the adaptability of the team was simply impressive – short deadlines, high pressure – they still delivered. The clarity of their advice really helped the Trustee follow the bulk annuity process and focus on the key decisions to deliver this positive outcome for the Fund."
Following the completion of the 5 April 2019 actuarial valuation, the Trustee asked us to provide some indicative insurer pricing estimates, on the basis that some significant contributions from the employers were expected (which would improve the solvency position). We also put in place a monitoring system using our Illuminate tool, which allowed us to consider changes in market conditions on a daily basis, and consideration was also given to the member data in the context of a potential insurance policy.
Over this period, the Trustee worked collectively with the employer and their advisers to remind non-pensioner members of their options as they approach retirement using the existing flexible retirement option process already in place. Management of this process, as well as implementation of a well-hedged investment strategy improved the market-readiness of the Fund. Coupled with employer contributions, the solvency funding level materially improved, allowing serious consideration of a bulk annuity transaction.
Over the summer and autumn of 2021 a significant amount of data and benefit work was accelerated in order to position the Fund in the best possible way to approach the insurance market. This work was completed in very short timescales balancing the need to be prepared before approaching the market with the desire to move quickly to avoid missing a potentially attractive pricing opportunity. It is worth noting that the Fund was already well placed on data and benefit matters due to various projects carried out since 2013.
"It is a privilege to be partnering with the Trustee on this important transaction which has provided certainty for the Fund members. The co-operation and engagement of all parties was exceptional, enabling a rapid response by the Trustees and facilitating the transaction on accelerated timelines."
Following an approach to market in late 2021, competitive quotations from a number of insurers were received in early 2022. Due to the proactive management of the Fund over the previous couple of years, including good engagement with the Sponsor and its corporate pensions advisers, the Trustee was well-positioned to take advantage of the competitive quotations. The Trustee acted flexibly and changed their pre-agreed market approach in light of a particularly competitive round one price, accelerating into an exclusivity period with the preferred insurer.
Barnett Waddingham led the negotiation with the preferred insurer through exclusivity on the Trustee side, advising on the provision of a suitable bespoke price-lock mechanism to help manage any execution risk. There were also various discussions around membership movements and the contractual terms in general.
Ultimately, the Trustee was able to work quickly to secure the Fund’s liabilities in full with an insurance company with highly competitive pricing. Due to the Fund experience and market conditions changes, the transaction was possible without a top-up being required from the employer.
Some of the challenges we helped the Trustee overcome included:
- a significant amount of data and preparation work, successfully considered in short timescales;
- clear visibility of the project and overall objective and proactive project management in response to developments to ensure the project met the required timescales;
- significant corporate changes with the employer during the process which challenged the viability of the transaction and involved Regulator engagement;
- complicated cashflow management and interaction with the premium payment and balancing payments; and
- the segregated nature of the Fund and the significant additional complexity this presented – such as section funding levels, the price lock and premium payment matters.
"We are delighted to have secured this deal with Standard Life. The transaction will deliver security to the members of the Findel Group Pension Fund and reflects many years of hard work by a strong and attentive Trustee Board and their advisers, along with contributions from the sponsoring employer. On behalf of the Trustee, I would like to thank all our advisers including Barnett Waddingham, FRP Advisory and Pinsent Masons for their advice and support in getting the Fund to this stage. I also thank PwC in their role as lead advisers to the sponsoring employer on this transaction and it is pleasing to see how well the Trustee and employer advisers worked together on this buy-in."
The following points were critical to achieving the positive outcome for the Fund:
- having a trustee board that is prepared and able to get strong training and develop into an effective and responsive decision-making team (which included having an independent trustee on the Board);
- importance of early consideration of the long-term objective and having a clear plan to deliver the objective;
- working constructively across all parties (including the employer and their advisers) and having clear communication between those parties at all times;
- well thought out preparation so that the Fund could move as opportunities arose; and
- flexibility to adapt and respond positively to developments throughout the process.
"Securing the buy-in represents a significant achievement for the Fund. The individuals that make up the Trustee Board have been so impressive in their engagement and drive over the years to achieve the objectives for the benefit of the members of the Fund. We very much look forward to working closely with the Trustee with the buy-in policy in place and to continue the success story for the Fund."
Buyouts and buy-ins
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