Working to develop and implement a clear pension strategy

We helped a top food retailer gain insight on its current pension position and help develop a robust pension plan.

The background

A top food retailer was concerned that its pension scheme liabilities had become as big as the company’s market cap. Historically they had been reactive to any changes in the pension world with the pension scheme trustees typically leading things. It had become increasingly clear that the risks associated with their pensions were also growing and that a clear pension strategy was needed.

Our solution

Our first steps were to carry out a review of their current pension scheme, understand their financial position and what opportunities potentially lay ahead.

• Pension strategy

Through a series of workshops we were able to articulate clear pension principles for the group and next steps for the strategy to work to within these principles. This looked at areas of funding and investments, improvements on the accounting process and an analysis of the implications of the “freedom and choice” options. We worked with the group’s treasury committee to ensure all stages of the process were communicated and they were in agreement with the next steps.

• Funding and investment

A valuation of the pension scheme gave indicative figures and recommendations for negotiating strategy/objectives. Keeping in-line with the pension principles the outcome was not to increase contributions but to use positive investment performance to opportunistically de-risk the asset base.

• Accounting

The desired accounting position was agreed and implemented immediately to tie in with the year end. Our comprehensive accounting report helped to reduce balance sheet strain, P&L charges and audit queries. It was also important the company understood the IAS19 options and therefore training was provided to staff.

Our Visualise technology was vital in providing the company with data on its members so they were able to understand complex interactions and make the most out of market opportunities.

The results

• Helped facilitate board level engagement both at inception, and going forward
• Reduced the company’s pension risk measure by 40% in two years
• Provided a clear understanding of market positioning against other competitors
• Allowed access to online modelling tool providing key scheme information and risk metrics as and when needed
• Established stable cash commitments for pensions and reduced contributions