The End Game – is your pension scheme ready?

July 26, 2023
Parminder K Latimer


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As pension schemes approach their end game, careful preparation is essential to ensure a smooth transition and to achieve the best possible buy-out or buy-in quotes. Employers and trustees must assess various aspects of the scheme, seeking assistance from pensions lawyers to ensure compliance with the scheme rules.

So, what three steps can you take to make sure your pension scheme is ready?

1. Get your ducks in a row

Firstly, it’s key to find out where you currently stand. You should ask your pensions lawyers to check:

  • The scheme rules and documentation
  • Scheme benefits: what are they? Are there different categories of members? Have there been transfers in from other schemes? How are the benefits calculated? When are the benefits paid? How are they increased (RPI/CPI/maximum increase)?
  • Any unusual benefits payable?
  • Death benefits, how do the trustees exercise their discretion?  
  • Check any scheme changes, what are they, have they been validly brought into effect? 
  • Any discrepancies between scheme rules and scheme practices – pension lawyers check with pension administrators
  • Is the member data clean?  If not, cleanse the data, this will significantly save money on an insurance company quotes – get your lawyers to raise any questions on unclean data so they can work with the other scheme advisors to resolve.
  • Have the scheme pension ages equalised, if so, are the amendments valid? Are there any doubts?
  • What has been decided about Guaranteed Minimum Pensions equalisation?
  • Any other current factors which may have an impact and need to be considered in advance, e.g. the recent NTL case in relation to contracted out rights and amendments?
  • Any existing or potential member disputes giving rise to increased liabilities and costs?

2. Areas of doubt

After carrying out your checks, if there are areas of doubt, get pensions legal advice on how to resolve these issues.  

Is there a need for an independent professional trustee to resolve issues where other parties are potentially conflicted or need additional expertise and support?

3. Going out to the insurance market

Steps 1 and 2 might seem time consuming and costly, however they will save employers money in the long run as the preparatory work will help insurance companies keep their quotes down, as they will have clarity about the scheme. 

A decent, well thought out and well-presented benefit specification helps an insurance company to supply a more realistic quotation, where there are unlikely to be any unforeseen circumstances arising, increasing the cost of the quote.  Importantly helping sponsoring employers to understand the funding required, so employers can budget for the transaction in their company / group accounts.

At gunnercooke our pensions team has a wealth of experience of buy-ins and buy-outs, producing benefit specifications, raising and resolving areas of doubt and we can also recommend insurance companies that are the right fit for your pension scheme.  We help to reduce or eliminate the pension risks off an employer’s books, whilst keeping the trustees and members of the scheme protected, ensuring the correct benefits continue to be paid on time, to the correct members and dependents.

We also operate a professional trustee company, again that has a wealth of experience in the buy-in / buy-out market and can run your project smoothly, giving the employer the confidence that we can de-risk their pension liabilities and bring their pension costs down. Find out more about gcTrustees here.

Parminder Latimer is a Pensions Partner at gunnercooke, who also specialises in pension disputes. Find out more about Parminder’s practice here to see how she and the team can help you with a smooth transfer to buy-out.