Complex legacy pension schemes can take up too much time and money

Managing the wind-up of a pension scheme can be a complicated and time-consuming process. This case study demonstrates how our PRINCE2 qualified project managers carefully managed the wind-up process for a small yet complex pension scheme.

The background

The pension scheme provided complex hybrid benefits – predominantly defined contribution, but with GMP underpins and other defined benefit features. As is typical of most small pension schemes, management time and expense was disproportionately high. It had been thought that winding-up the plan would be prohibitively expensive, or even impossible, due to the complexity of its hybrid benefits.

The Trustees appointed LCP as their specialist de-risking adviser in Q1 2015.

Our solution

LCP helped the Trustees through:

• Innovation – engineering a way to buy-out the plan’s hybrid benefits with an insurance company
• Market-leading buy-out advice – enabling the trustees to obtain an affordable premium and to structure the assets so as to stabilise the buy-out shortfall
• Other specialist advice – for example, in relation to allowing for the GMP underpin and for GMP equalisation and in communicating the changes to members
• Budget control – by assessing and monitoring the various options for settling members’ benefits, the Trustees were able to keep the company in full view of likely buy-out 'top-up' contributions required
• Project management – of the various workstreams against a detailed plan

The results

With our advice, the Trustees found a successful route to buy-out, providing benefit security for members and enabling the sponsor to wind-up the plan and avoid future expense.

LCP provided us with practical advice and strong process management. This was fundamental to successfully securing members’ benefits in full and winding up the scheme, whilst managing the sponsor’s needs and expectations

We had previously spent too much time and money managing our legacy hybrid scheme. LCP brought innovation and strong practical experience, guiding our trustees along a successful route to wind-up. If we had known it would be so straightforward, we would have done it years ago