Spotlight on delivery in defence: Delivering the largest corporate pension scheme merger in UK pensions history
The Challenge Once the schemes had been formally merged, the next phase was to rationalise the combined investment assets to align them with the investment strategy for the merged scheme, in addition, the dismantling of the legacy unitisation structure, which was no longer required and would add unnecessary cost and complexity to the management of the investment assets, was also required. The benefits available through the merger were substantial and included financial savings on external advisors, asset management charges and scheme administration costs, as well as the lower costs associated with fewer trustees, trustee boards and committee meetings.
On the advice of the Pensions Regulator, our customer initiated a programme to merge four of their pension schemes, the largest ever pension scheme merger in the UK with £25bn of assets under management. The defined benefit schemes each had different benefits bases, different levels of maturity and different funding levels. To achieve the merger required, the agreement of the Board of Trustees of each of the merging schemes, the constitution of a new Board, and formal consultation with the 185,000 scheme members, for whom preservation of their pension benefits was paramount; carefully planned and coordinated stakeholder management was therefore crucial. Operationally, the merger required complex preparatory activity across many separate business functions, including: actuarial alignment of scheme liabilities; transfer of legal ownership of the myriad assets of the merging schemes into the single remaining scheme; negotiation with the independent advisors of the merging schemes to demonstrate that the interests of members were being protected; alignment and coordination across the administration of the four schemes, such as receipt of contributions, payment of benefits and handling of member queries; alignment of statutory and regulatory reporting.
SUCCESSFUL DELIVERY OF THIS PROJECT LED DIRECTLY TO THE SCHEME BEING AWARDED “Defined Benefit PENSION SCHEME OF THE YEAR” AT THE ANNUAL PENSION SCHEME AWARDS, 2021
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