Aon’s Risk Settlement and Member Options teams worked in a joint working party to take the PA Consulting scheme through a process to improve security of member benefits and to make new options available to members. This included a successful pension increase exercise (PIE) which was accepted by 41% of the members, helped to reduce inflation risk, and made the scheme simpler to insure.
An enhanced transfer value (ETV) exercise was also run alongside the buy-out transaction, with the insurer agreeing to take on the risk associated with the take-up rate - which provided the company with certainty over the buy-out premium. In the member option exercises, members were provided with access to free independent advice so they could make an informed decision.
Ben Roe, senior partner and the head of the member options team at Aon said: “This has been a fantastic example of getting results by working collaboratively, both to de-risk the scheme and to offer options to members along the way. It’s a great demonstration of the importance of integrating member options into the journey to buy-out.
“What makes this deal particularly notable is that the pricing of the enhanced transfer value exercise was captured in the buy-out pricing to give PA the certainty they required. It’s a first in the market and has proved to be a genuine win:win for all parties. Members have had the opportunity to take advice on an option which may not be available at this level again in the future. It was a key element in the process of a successful full buy-out.”
In what has been a three-year project, preparation and integration were key elements in allowing the deal to take place.
John Baines, partner and head of bulk annuities at Aon said: “Securing this transaction at a much lower cost than was anticipated at the start of our involvement, is an outstanding result. The innovative structure to integrate member options within an insurance transaction allowed attractive terms to be locked in much more quickly than is normal.
“The ability to achieve this in a Solvency II environment is also particularly pleasing and - following a relatively quiet year for large full scheme transactions in 2017 - this deal looks set to lead the way for many similar ones in a bumper 2018.”
Mitul Magudia, Head of Business Development at PIC, said: “We are really pleased to have been able to provide an insurance solution that removes both financial and demographic risks. This transaction demonstrates how a joined-up approach to managing pension assets and liabilities can have excellent results. We are delighted to have been able to work as part of a bigger team that was committed from the very start to achieving the best outcome for members.”
Kully Janjuah of PA Consulting, said: “This project has achieved the outcome we really wanted. By a collaborative approach from all parties, we have been able to secure a deal which no-one imagined possible at the outset.
“The Aon team has been fully involved in all aspects of the process and we are very pleased at the support and advice that they have provided throughout.”
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