The background

Through acquisition, the pension scheme sponsor had different pension schemes with noticeably different funding levels. With an aspiration to merge schemes longer term, they were particularly keen to consider actions that improved the funding position for the less well funded scheme.

Our solution

We looked at the full suite of potential liability management initiatives with the sponsor taking into account the make-up of the scheme membership. Our analysis showed that offering;

• advised transfer values to non-retired members over age 55; and
• pension increase exchange to eligible members who had already retired

was anticipated to generate the best value for money in a manner which also meant most of the scheme membership were being offered something new and which should therefore generate strong engagement with the chosen financial advisory firm.

The result

Of the c.1,200 members who were included in the offers, c.300 (25%) chose to do something other than the status quo of leaving their pension benefits unchanged. When expressed in terms of liability to the scheme, the 25% figure was significantly higher – meaning that in this case it was the members with larger pensions and larger liabilities who felt that (and were advised that) the offers were right for their circumstances.

The sponsor benefitted from the member goodwill obtained during the process, as well as the significant reduction in triennial valuation and IAS19 liabilities which resulted from the project.  Member feedback was excellent. In some cases individuals made positive life changing decisions which they previously weren’t aware were options, or which wouldn’t have been available without the company instigating these initiatives.