Valuation negotiations

Increasingly, the funding negotiation with your pension scheme’s trustees is one of the most complex transactions which your company has to tackle. The challenge is to ensure that the scheme is appropriately funded, but in the way that best balances the opportunities and risks that the company is facing. That’s easier said than done!

When appointing your corporate adviser, you need to make sure that the individual’s breadth of experience and commercial acumen puts him or her at least on a par with the trustees’ scheme actuary, who is usually very senior.

At bac our team has many years of experience of supporting both trustee and company boards through valuation negotiations. This means that not only can we help you develop a robust negotiation strategy but we can also give you real insight into how to get the deal done.

The key to a successful valuation outcome is planning and preparation in advance of the results being known, so you can approach the negotiation on the front foot.

A multinational employer wanted to manage the pace of funding to its large UK pension scheme (around £6 billion of liabilities on a buyout basis). The company had an excellent working relationship with the trustees. However, the trustees did have strong powers and the Pensions Regulator expected the trustees to take a firm stance on affordability and dividend policy.

The trustees’ opening position was a short recovery period to fund the scheme’s technical provisions. Instead, we worked with the company to develop a low risk secondary funding target to be funded over a timeframe reflecting the cashflow profile of the scheme. In conjunction with a long term investment de-risking strategy, this has resulted in much more stable long term contribution levels and is in line with emerging guidance from the Pensions Regulator.

As part of the long term funding structure, a dividend framework was agreed based on key company and scheme funding metrics. This allows the company to plan its dividend policy with confidence that it will not run into problems with the trustees.

25 September 2020

In the news this week, the CMI asks for industry views on how to allow for 2020’s mortality experience, the DWP launches a small pots working group, the autumn Budget is abandoned but the Chancellor announces new measures to help businesses, the Barclays scheme subscribes to a Barclays bond and there is another repeat buy-in.

Endgame planning

Journey plans or glide paths may have been around for a long time but they’re at the heart of the Regulator’s proposed new funding code. In this Pensions Perspective, Leonard Bowman looks at how long-term funding and investment plans are evolving and explains why companies are increasingly taking the lead in designing an endgame strategy for their schemes.

Pensions Arena July 2020

This quarter’s Arena has a summary of our recent Pensions Perspective, “Emerging from lockdown”, which looked at how best to tackle the most common pension issues which companies are currently facing. It also shows all the usual financial and investment analysis for the quarter ending 30 June 2020.

Emerging from lockdown

As we keep hearing, we are living in unprecedented times. However, as we turn our attention to the future, what does the “new normal” mean for defined benefit pension schemes? In this Pensions Perspective, Leonard Bowman considers the most common pension issues that companies are facing and how best to ensure that the company approaches these on the front foot.

Getting buyout ready

Covid-19 has created many challenges for DB schemes but, for those ready to transact in 2020, it may have created even more favourable market conditions for a buyout. The problem is that most schemes are not there yet. In this Briefing we look at what being “deal ready” actually means and what work it will involve.