Corporate Planning
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A particular specialism of our corporate
department is the ability to help companies
and trustees, who operate final salary pension schemes, develop strategies to control costs.
We can help you by:
- planning, project management and execution of liability reduction programmes. We have considerable experience of this, and have had noteworthy success, where we have been able to wind up pension schemes for substantially less than full buy out cost. We aim to keep the up front costs to the company to a minimum and link our remuneration to the overall success of the programme, and agree the parameters in advance of the commencement of the programme, thus providing the company with the comfort that they will not be saddled with considerable costs if the exercise isn't a success. References are available to substantiate these claims.
- providing advice to scheme members considering their options in relation to any offer made by the employer as an incentive to transfer out. We adopt an approach whereby the member, rather than the employer, is in control of how we are remunerated for our advice. This approach ensures our advice is independent and free of any influence of the employer, by maintaining distance between the employer and the advice given. Some of our competitors encourage the employer to become implicit in the advice process by agreeing the critical yield before the offer is made, and then paying the adviser to recommend a transfer. This could be a dangerous strategy and create problems for scheme trustees, as they must ensure the member receives suitable unbiased advice.
- reviewing your service providers and associated costs in the areas of Administration, Actuarial, Consultancy and Investment Management
Below are some examples of liability reduction projects we have been involved in, the success rate we achieved and what our clients said about us.
Project A:
Large European Group with a UK operation
The inclusion of the FRS17 liability on the Company balance sheet had resulted in a reduction in credit rating, which meant the payment terms offered by its major supplier of raw materials worsened, placing a further strain on the Company's profitability and cashflow.
The employer funding rate was due to increase from 17.9% to 23%.
The deficit on wind up was in excess of £10m.
We were appointed in March 2007, when the scheme was still open to future accrual.
All of the schemes liabilities were discharged by the end of April 2008, at a cost of £3.6m (including all legal and professional costs), which is some £6.4m less than the funds required to secure benefits via deferred annuities.
What our client said:
“Your style of project management and ability to focus on the key issues (rather than those which aren't relevant) has been invaluable to this process.
Having discussed our experience with our professional advisers and other employers who are in a similar position to us, were believe that your input has resulted in us completing this process two years earlier than we would have done had you not been involved”.
Project B:
Privately owned Company based in the UK
The cost to run the scheme was the Company's single largest overhead.
The funding rate was due to increase despite the fact that the scheme had closed to future accrual.
The programme achieved a success rate of 85%.
The FRS17 liability improved by £1.4m, for a cost of £167,000 (including all legal and professional costs).
The improvement in the Company's balance sheet has improved the Company's credit rating, thus reduced the PPF levy from £18.5k to £4.5k.
What our client said:
“Very impressed with immaculate planning and obvious effort that's gone into this exercise”.
Project C:
Privately owned Company based in the UK
The company acquired a business in the summer of 2006 which had a defined benefit scheme, at which point we were appointed. The purchase price was reduced by £750k to reflect the potential liabilities the company was taking on.
Historically the purchaser had not provided its employee's with any form of pension benefits.
The scheme closed to future accrual in February 2008.
The deficit on wind up was in excess of £1.1m.
All of the schemes liabilities were discharged by the end of June 2008, at a cost of £37.5k (including all legal and professional costs), which is some £712k less than the reduction in purchase price to reflect the potential liabilities when it was purchased.
What our client said:
“You need to stress the fact that the way in which you project managed the overall process resulted in me having to spend less than 10 hrs of my time, and quite frankly I was taken a back how simple you made the process and the rate of success you achieved”.
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