A TAS300 V2 Case Study : No name needed because the points are so generic

£165m buy-in of a Sponsor Co UK pension scheme with a major life insurer was undertaken in April 2024.  The lead advisor must have carried out a TAS300 V2 assessment to meet FRC set actuarial regulations.  Did the trustees and sponsor have the evidence of a bulk transfer / run-on comparison from their advisor?  It should have provided a risk-benefit analysis for stakeholders explaining:

• What is the modelled probabilistic risk to the value of members’ pensions which the transaction addresses?  How do these calculations assess the risk of investment grade credit of the large European parent failing to support the UK subsidiary in meeting its obligations?

 

• What is the probability of a scheme funded to buyout levels being able to make discretionary payments to members over time if it has a run-on strategy?  Could resources be available to fund better pension provision for current employees? Could more assets over time be invested in productive assets?

 

• On what basis did the advisor conclude the chosen life insurer’s pricing was attractive ahead of expected changes to solvency and reinsurance rules; easing of regulations on the use of surpluses and the reviews of how FSCS and PPF operate? 

 

• Did the TAS300 V2 exercise note the high profit levels of insurers in an overheated market?

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• Did the advisor research any credible run-on options as TAS300 V2 requires?

NB

• Sponsor Co Global has a market capitalisation of over £2 billion.  It is an investment grade credit.  
• Sponsor Co UK contributed over 5 years £50m in cash to the scheme’s £170m in assets as at December 2022. The sums if held in escrow in cash would have avoided a near 35% reduction in value as gilt yields rose.
• Pension contributions of £77m have over 10 years exceeded pre-tax profits and have exceeded DC scheme contributions by 5 times.  
• Current pension benefits are £10m.
• A run-on strategy with 2% of assets a year to be used on a discretionary basis could fund completely higher DC contributions and add over 10% to pensions and pay all admin costs.

10 Year Pension Scheme Summary