The beauty of transactions

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Hot topic

Date published:

Friday, 1 July 2022

Author:

Suzi Lowther

We’ve just had a team day – and it was so nice to see people in person and finally (properly) meet colleagues I’ve worked with for the past year and only met virtually. Early in the day I asked everyone to tell me one thing they’d been working on they’d found particularly interesting. The responses were wide ranging – from adviser reviews and member communications to master trust mergers and the impact of the Bauer judgment.

The most common response was a transaction or the potential for one in the near future. Whether it is a buy out, buy in, corporate restructure or realising a pension scheme’s journey plan is nearing the end I found it fascinating, with a multi-disciplined team like ours, to hear what different team members each take from a project on a client’s scheme.

For Kevin Kenneally, a corporate restructure was at the top of his list. These offer a professional trustee the chance to build new relationships and have greater interaction with personnel at the scheme sponsor. It is a chance to use strategic planning skills. Pulling together all advisers and stakeholders to work together in what can only be described as fluid (but demanding) timelines always adds a buzz.

Working closely with a scheme’s sponsor is a recurring theme in the type of work our team enjoys. Another of our professional trustees, Colin Marsh, has enjoyed developing a journey plan for a maturing scheme where the end result is known but the precise method and timescale for getting there isn’t yet. With one client, Colin is at the stage of clarifying potential issues that need to be dealt with to get the pension scheme ‘transaction ready’.

Other members of the PSGS team found resolving those issues most interesting. Julie Karavis, an experienced member of our governance team, has recently worked through a data cleanse and guaranteed minimum pension (GMP) equalisation exercises for one of her schemes. It isn’t a surprise various issues arose with the data cleanse, including the need to ensure unusual individual benefit entitlements were correctly recorded by the administrator and accounted for by the insurer as well as treatment of some elements affecting a wider group of members. Dealing with these and the intricacies involved with project managing the GMP exercise was fascinating.

More important though is Julie (as we all do) will share everything she learnt with that scheme with the whole team so all our clients can benefit from that experience in future. That will come in handy for James Double who has a client, as for many pension schemes, who is getting very close to buyout much earlier than expected!

A central part of the process for James is considering the adviser to work with on the transaction. Depending on the specific circumstances of the scheme, the incumbent actuarial consultant isn’t always the best placed to help position the scheme with insurers to get the best deal (especially when GMP equalisation and benefit rectification projects are going on at the same time).

On a buy in project last year, James Duggan worked closely with the selected adviser to approach insurers in a completely new way, asking them “this is what we want you to insure, this is how much we have, will you do it?” Being in a strong enough position with the scheme data, benefit specification etc to pose the question in this way took skilled project management and a ‘one team’ approach with all the scheme’s advisers and the corporate sponsor.

For Siphiwe Moyo in our specialist Pension Protection Fund (PPF) team, establishing whether a scheme is ‘over-funded’ , allowing a buyout of pension scheme benefits above PPF levels is an interesting conundrum. For these schemes, members are most definitely the client and investigating what’s the best option for them can be complex. The various court cases (Hampshire, Hughes, Bauer etc) that have the potential to affect the level of PPF benefits makes them even more so!

Pension scheme transactions are definitely on the up and will be keeping the PSGS team occupied in the coming months - along with single code compliance, getting data ready for new pensions dashboards, preparing for the new defined benefit (DB) funding code etc – the question of whether the market has the capacity to deal with it is a topic for another day!

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