Svitzer Marine secures £36m medically underwritten buy-in with Just Retirement
The background
Members of the Svitzer Marine Pension Scheme worked in the shipping industry and anecdotal evidence suggested a prevalence of medical and lifestyle conditions that would not be reflected in conventional buy-in pricing. By running a medical underwriting process, the Trustees were able to achieve better value as Just Retirement could more accurately assess the mortality profile of the membership.
Our solution
- Detailed health and lifestyle information was gathered from 200 pensioners between age 65 and 80 using telephone interviews by trained professionals, allowing an accurate assessment of the underlying longevity of the membership
- The process achieved an 85 per cent response rate in a seven-week period, resulting in significant savings compared to a conventional buy-in
- The Trustees also agreed a sophisticated price hedging strategy with Just Retirement to ensure that the price moved in line with the value of the allocated assets
What is medical underwriting? Medical underwriting provides pension plans with a way of insuring their liabilities by unlocking value for medical and lifestyle factors not typically recognised by conventional buy-in pricing or scheme valuations. This can be effective where the mortality is unusually heavy or where there is a concentration of liabilities in a relatively small number of individuals.
The results
Svitzer Marine successfully completed the largest medically underwritten pensioner buy-in at the time (£36.5m). The key advantage of the underwriting process for them was that it delivered value for medical and lifestyle conditions not reflected in the pricing of a conventional buy-in, which meant that the economics of the transaction were attractive to the Trustee. No cash contributions from the sponsoring company were necessary to support the transaction.
