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LCP urges
smaller schemes to take steps to avoid being crowded out of the buy-out market

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With over £10bn a year of buy-in and buy-out transactions becoming the new norm, small schemes run the risk of being crowded out of the buy-in and buy-out market and receiving higher pricing.  Using a streamlined service can help avoid this.

LCP’s research shows that schemes that fail to get engaged pricing from insurers can pay up to 5% more – resulting in significant extra cost or the transaction not completing.  Over 2014 and 2015 there was a 25% year-on-year reduction in the number of buy-ins and buy-outs under £100m as some insurers focused on larger transactions. 

For smaller schemes looking to de-risk, it is therefore more important than ever that they are at the front of the queue when insurers decide which transactions to prioritise.  A streamlined service with pre-negotiated insurer contracts can help to make smaller schemes more attractive for insurers.  LCP was the first consultancy to launch a streamlined buy-in and buy-out service for smaller pension plans in 2010 and has now completed 19 transactions with total premiums of over £500m and a conversion rate of nearly 90%. 

LCP Partner David Stewart said, “The evidence shows that smaller schemes are struggling to get engagement from insurers, particularly for full buy-outs. I am pleased we have been able to help so many smaller schemes address this through our streamlined process. Not only does it provide certainty on timescales and fees but insurers recognise LCP’s process is tried and tested so prioritise such schemes accordingly. Such insurer engagement can improve pricing by as much as 5%.” 

One example of a smaller pension scheme that has benefited from LCP’s streamlined service was the Visiocorp UK Limited Pension Scheme.  LCP advised them on a £20m full buy-in that obtained competitive pricing from four insurers and took less than 3 months from start to finish.

Jacqueline Woods, Chairperson of Trustee Board of Visiocorp UK Limited Pension Scheme, said “LCP’s streamlined fixed-fee service provided a robust process in tight timescales, helping us to maximise insurer engagement and achieve competitive pricing.”

Clive Wellsteed, partner and head of LCP’s de-risking practice said, “We expect the buy-in and buy-out market to continue to get busier and we are delighted to offer a market-leading service – now in its fifth year – to help smaller schemes get the pricing and terms they need.”

LCP’s fixed fee streamlined service is suitable for pension plans considering buy-in or buy-out transactions of up to broadly £100 million.  LCP also offers a service with full flexibility over the terms and process, typically used by larger schemes and those wishing to include more bespoke features.

Read the case study: Visiocorp UK Limited Pension Scheme streamlined buy-out