CASE STUDY: DC PENSION WITH DB ELEMENT – THE JLT ‘HYBRID’ SOLUTION

CORPORATE CONSULTING & BUYOUT TEAM
Full benefit settlement in record time for DC-DB hybrid scheme to allow corporate restructure

THE CHALLENGE

For a planned corporate restructure, MCM approached JLT to urgently settle the liabilities of its UK pension scheme before the appointment of a (solvent) liquidator.

The pension scheme had a complex hybrid benefit structure with members’ individual defined contribution (DC) accounts underpinned by guaranteed defined benefits (DB). This was a result of previous action taken by the scheme to “contract out” of the earnings-related part of the State Pension Scheme. These DB underpin benefits required careful treatment, making both the process of educating members on the implications of the changes and the settlement of liabilities significantly harder than is normal for a DC scheme.

KEY FEATURES

Key Features 

THE JLT SOLUTION

The most straightforward option would have been to buy out all of the liabilities directly. Whilst this option met MCM’s objective, it was not necessarily in the members’ best interests and came at a relatively high price.

JLT developed a solution that gave members the opportunity to discuss their pensions with an adviser. This ensured they fully understood the implications of the buyout and provided them with the information they required to decide whether a transfer out was a better option for them.

Whilst the members were making their decisions, JLT monitored the buyout market to establish costs for an as yet unknown population.

Here is how the multi-disciplined JLT team successfully completed the transaction:

JLT Solutions 

THE OUTCOME

  • The scheme liabilities were secured in full before the appointment of the liquidator
  • Members benefited from the sponsor-funded independent financial advice and selected the most appropriate option for securing their benefits
  • The trustees were able to discharge the scheme liabilities with full financial support from MCM and the covenant of a leading UK insurer, Legal & General
  • MCM were able to greatly reduce their liability settlement costs through the strategy design and buyout broking work done by JLT

WHAT THE CLIENT SAID

 

Quotes

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.

- Toyomu Chiahaya, Managing Director, MCMUK

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