The Pearson Pension Plan

Case Study

Key Facts:

  • £600m pensioner buy-in transaction, covering the liabilities of around 2,400 members

  • The transaction included enhanced security features

  • Umbrella structure established to support future de-risking activity

The transaction:

In 2017, the trustees for the Pearson Pension Plan began to actively seek quotations from insurers for pensioner buy-ins, along with enhanced security features.

This activity was part of the trustee’s long-term strategy to reduce risk over a period of time by aligning investments more closely with member benefits, and insuring members’ benefits via bulk annuity insurance contracts on an opportunistic basis.

When looking to transact, the trustees were focused on three key areas:

  • Competitive pricing – the transaction needed to be commercially attractive, relative to the Plan’s own technical provisions
  • Enhanced security features – it was important for the sponsor and trustees to incorporate additional enhanced security features as part of the deal
  • Establishing competition for future tranches – another key element was the ability to complete future buy-ins quickly if and when pricing is competitive, building on the strong relationships and contract terms already in place.

How did the transaction support trustees?

By working closely with Trustees and their advisers, Aviva developed a clear understanding of the outcomes they were focused on and delivered solutions to meet their needs. These included:

  • Transaction of a pensioner buy-in, covering around 2,400 members’ liabilities
  • Implementation of an enhanced security structure
  • An umbrella contract – put in place to allow for the swift execution of future tranches, as and when market opportunities arise. This also supports the Trustees with their long term de-risking strategy.

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