Pension buyout and de-risking

Pension scheme buyouts, buy-ins and longevity hedging have become an important aspect of managing pension risk. Our team advises on solutions that fit client requirements and don't force a single approach. Key areas where we help clients include:

• Feasibility studies
• Exercises to obtain market pricing for buyouts, buy-ins and longevity hedges
• Cost analysis including accounting and funding position impact
• Designing de-risking proposals and frameworks

Why LCP

We designed and implemented the first new-style pensioner buy-in in early 2007. We have since completed many more buy-ins including advising on Cable & Wireless' landmark £1 billion pensioner buy-in. The following credentials demonstrate our relevant practical experience:

• We alerted clients to buyout opportunities in 2006, a year before competitors
• We designed and placed the first £100 million pensioner buy-in contract for an ongoing pension plan of a FTSE 250 company in January 2007
• We have completed more than ten £50 million+ buy-ins
• We have advised buy-in deals which included collateralisation to provide additional security to pension plan trustees
• We designed and implemented the first syndicated buy-in where a pension scheme placed three separate buy-in contracts with separate insurers, covering different liabilities
• We have strong relationships with all of the active insurers and experience of placing business with eight of them
• Insurers tell us our negotiation process and attention to detail are the most robust on the market

Our approach

We provide impartial de-risking transaction advice through three-stages:

Stage 1 - Review options

Buyouts and buy-ins are relatively straightforward. But scratch beneath the surface and there are different regulatory regimes and a range of contract options and preparatory steps.

With the increased sophistication of the buyout market, trustees and companies must increase their understanding and monitor market opportunities.

We offer buyout training for experienced and new trustees. These sessions:

• Review how to assess potential opportunities
• Assess the regulatory landscape
• List the insurance providers
• Analyse transaction steps
• Discuss real-life case studies

Stage 2 - Practical steps to prepare for a transaction

Careful preparation pays dividends. It helps obtain better provider engagement, keener pricing and the ability to move quickly when needed. Here are five practical steps to take in advance of any transaction:

1. Create a trigger based approach, agreeing pre-determined points when deals look attractive
2. Review pensions data
3. Review investments. Are they liquid? Do they match the buyout pricing position?
4. Review insurance company strengths and weaknesses
5. Monitor prices

Stage 3 - Execution

Make sure you work with trusted advisers who have relevant experience and can help you through the stages of closing a transaction.