Leading a complex wind-up through expert support

Thanks to our expert consultants, a DB pension scheme with complex benefits successfully reached its ultimate goal of wind-up – with surplus funds facilitating the provision of additional benefits to all members and a return of funds providing a future economic benefit for the sponsor. 

This was a true ‘win-win’ outcome for the trustees and the sponsor, with strategic advice delivered by our trusted advisers.

Our client

We were the full services adviser to the pension scheme for many years and had developed a strong relationship with the trustees. When the time came for them to consider a bulk annuity transaction (at a time before they were as popular as they are now) to lead to eventual wind-up, they turned to us for help.

The complexities

The journey to wind-up was fraught with difficult challenges and we successfully navigated the trustees through stormy waters to ensure the goal of wind-up was reached. The key challenges included:

• Intergenerational fairness issues from the closure of the scheme to future accrual.
• Dealing with a protracted member complaint, and the implications of this on the timing of the buyout request.
• Complex Guaranteed Minimum Pension (GMP) projects, including dealing with step-ups and anti-franking practice.
• A pre-existing buy-in that was misaligned with the scheme’s benefits.
• The use of surplus and how to spend it most efficiently for both members and the sponsor.
• Historical data issues where the administration system didn’t match the payroll system.
• Implementing multiple benefit corrections and augmentations at the same time.

How we met these challenges

Specialist expertise and collaboration

Across BW, our specialist data and calculation teams came together to support each individual project. It was a whole team effort covering many areas of expertise, led by consultants with vast experience.

Data rectification to ensure transaction readiness 

We managed an array of data changes arising from rectification exercises to ensure that the benefits insured actually represented what members were entitled to from the scheme. We carried these exercises out in the lead up to the bulk annuity transaction which removed the premium uncertainty and ensured the scheme was transaction ready. Furthermore, we asked members to confirm their details after all the data changes had been implemented, giving confidence to the trustees of the accuracy of our work.

Strong communication and engagement

Effective communication was of vital importance. Keeping the insurer, trustees and sponsor up to date on the progress of projects and collaborating with the external legal and secretarial advisers helped with smooth execution. Although the trustees had some challenging decisions to make, our consultants were on-hand to support them and give them the reassurance and confidence they needed.

Member-focussed communications

Members were at the heart of this wind-up. They were kept informed as each project was finalised, with a communication clearly setting out the impact it would have on their benefits in the scheme. Some of the member communications covered the results of several different projects showcasing our ability to plan and manage complex communication strategies. 

The highlight was a letter drafted by our team, informing members of the great news that the trustees had granted them additional benefits. We also delivered the news that the sponsor would receive a share of the surplus assets seamlessly, complying with all of the relevant and onerous wind-up legislation.

A fantastic outcome

Steady progress, achieved by addressing each project promptly as it arose, was key to keeping the wind-up on track and delivering a successful outcome.

Members’ benefits have been uplifted which are now far more secure, while the sponsor has received an economic benefit and removed the risks of this pension scheme from its balance sheet.