Case Studies
Case Study 1 - Ensuring all parties benefit from a takeover
Outcome: A stronger covenant - Contribution requirements reassessed
Outcome: A stronger covenant - Contribution requirements reassessed
- A new parent company guaranteed specific recovery plan payments and insolvency risks up to a maximum level. This enabled the trustees to respond to the strengthened covenant position by accepting lower contributions over a longer period.
- A higher investment return assumption for longer was adopted.
Case Study 2 - How to ensure the whole is stronger than the parts
Outcome: Parent's increased commitments changed the actuarial approach
Outcome: Parent's increased commitments changed the actuarial approach
- By introducing for the first-time parent company guarantees of recovery plan payments.
- The trustees accepted a large proportion of payments being deferred and rolled-up.
- Payment dates are set but can be moved forward or backwards dependent on the scheme’s funding position. The payments can be eliminated if the deficit is dealt with by the end of other recovery plan.
Case Study 3 - How diversifying risk benefits all parties
Outcome: Use of existing banking lines
Outcome: Use of existing banking lines
- Commercial banks can provide payment guarantees, enabling trustees to defer payments that have arisen because of the prudence of the actuary. Payments will be made later in a recovery plan when, and if, it is clear they are needed.
Case Study 4 - Show that Integrated Risk Management makes a difference
Outcome: Reassess impact of the investment strategy
Outcome: Reassess impact of the investment strategy
- Taken as part of an Integrated Risk Management exercise and given the strengthening of the covenant, the speed of derisking has been reduced under the Statement of Funding Principles.
- The long-term discount rate is now being set not to drive to self-sufficiency and annuitisation, but to reach a reasonable long-run return achievable through a well balanced fixed income portfolio.