The MCM pension scheme involved a complex hybrid benefit structure with members’ individual defined contribution (DC) accounts underpinned by “contracted-out” defined benefits (DB). These guaranteed DB benefits required careful treatment, making a settlement significantly harder than is normal for a DC scheme.
Following a corporate reorganisation within the Mizuho group, a liquidator was to be appointed to the principal employer of the company’s pension scheme. In advance of the liquidator appointment the company wanted to ensure all member benefits in the scheme were settled in full. JLT advised MCM on an advice-led transfer value exercise, followed by parallel DB and DC buyouts, using JLT’s hybrid solution, developed with Legal & General, to settle the scheme’s liabilities.
Engaging early with the scheme trustees and their advisers, JLT designed a clear communication strategy to ensure members fully understood their benefits and options. This tightly managed exercise, involving coordination of MCM, the trustees and the sponsor-funded independent financial adviser, led to a 55% take-up rate for the transfer value option and highly compressed buyout timescales.
Rob Dales, Head of Corporate Consulting at JLT, said: “The DB buyout contract was converted from buy-in to buyout within 12 business days of premium payment, in contrast to typical timescales within the industry of 9-24 months.
“With the scheme liabilities secured in full ahead of the date of a planned corporate restructure, along with support from Legal & General, MCM were also able to significantly reduce their liability settlement costs through our strategy design and buyout broking work”.
Toyomu Chiahaya, Managing Director, MCMUK said: “JLT were an ideal partner for this exercise, working closely with us to understand our needs and deliver an effective and timely solution. They kept everything on track throughout numerous challenges and obstacles and we are delighted with the results we have achieved for both MCM and the scheme membership in ensuring all liabilities are settled in full.”
Julian Hobday, Business Development Director, Legal & General, said: “We are delighted to have been chosen to look after and provide the pensions for the members of this scheme. By drawing on our unique DB and DC expertise, and working closely with the advisers, we were able to move to buyout within two weeks of the transaction date which is a fantastic result for all involved.”
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