How we helped Tate & Lyle cut UK pension liabilities with £350m buy-in
- £1.1bn of pension liabilities in the main UK plan in late 2012, with approximately two thirds in respect of pensions in payment
- De-risking out of return-seeking assets was well advanced, with limited exposure to equities after a series of triggered switches
- The switches were designed to reduce exposure to each of the key financial risks over time
- Options for longevity risk were considered in parallel to avoid a large and concentrated longevity bet remaining at the end of the hedging programme.
- A working group of representatives from Tate & Lyle and the Trustee Board was set up to consider longevity swaps and pensioner buy-ins
- The group concluded that a pensioner buy-in would provide better value than a longevity swap given the plan's risk profile and asset strategy
- LCP helped the Trustees select a suitable buy-in provider and set up a trigger-based execution mechanism
- This allowed the Trustees to benefit from favourable movements in insurer pricing and execute when their target financial metrics were met.
- In December 2012 the Trustees insured c40% of the pensioner liabilities in the UK pension plan with Legal & General in a transaction worth £350m.
- This achieved a concrete step in the de-risking of the pension plan, with the non-insured liabilities after the buy-in reduced to £700m.
How we can help
We are market leaders at each stage of de-risking, including planning, investment strategy, transactional services and wind up.
We help pension scheme trustees and sponsors to determine the ultimate destination for their scheme and help them put together a plan to get there, including how to effectively manage the risks they face along the way.