A 'win win' for members and company, achieved through efficient execution of the transition to buy-out

Background

In August 2022 the WH Smith Pension Trust completed a £1bn full buy-in with Standard Life, including both DB and DC benefits. The buy-in was achieved at pricing that resulted in a significant surplus arising to be shared between Trust members and the corporate sponsor – as soon as possible. The Trust was the largest DB pension scheme to transition to buy-out with Standard Life; this transition was managed at a time when Standard Life were also onboarding a new Third Party Administration (TPA) provider for its bulk annuity business. 

Our solution

LCP’s post-transaction specialists worked with the Trust’s other advisers and with Standard Life to draw-up and deliver a project plan that optimised execution efficiency. To do this, we challenged conventional processes by identifying every area in which workstreams could be run in parallel to minimise periods of inactivity whilst ensuring a robust wind-up process. 

In addition to maintaining momentum through rigorous project management, LCP: 

• Provided actuarial advice (including specialist advice to inform the Trustee’s decision on an appropriate rate of inflation for pensioners) to support the process of enhancing members’ benefits and negotiating insuring these cost-effectively. 
• Worked collaboratively with Standard Life to implement a Winding-Up Lump Sum (WULS) exercise, agree calculations, ensure implementation of the buy-in policy contract and facilitate smooth transition of administration. 
• Managed the sequencing of multiple steps to ensure efficient return of surplus to the corporate sponsor, from the process of statutory notifications through to the practicalities of transferring cash and an illiquid asset out of the Trust once all benefits had been secured. 
• Provided additional resources to support the transition process including the drafting of member communications, provision of specialist DC advice and – through our Data Services Team – supporting the Trust’s administrator on specific data cleanse workstreams.  

The outcome

• The transition to buy-out was completed in just 2 years – a considerably shorter period than would otherwise be the case for a scheme of this size. 
• Members received enhancements to their guaranteed benefits. 
• All member benefits are now fully secured with a PRA regulated UK life insurer. 
• The Trustee board was fully discharged of its obligations. 
• The corporate sponsor received a share of surplus, having made significant contributions over the years.