Tate & Lyle
£350m pensioner buy-in

Pensions & benefits

How we helped Tate & Lyle cut UK pension liabilities with £350m buy-in

The background

  • £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.

Our solution

  • 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.

The results

  • 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.