I recently worked with a client looking to reduce their liabilities. They decided to offer members of the scheme enhanced transfer values.
Prior to beginning the exercise, the client had scheme assets of £3m, liabilities of £6m and so a buyout shortfall of £3m.
Their ultimate aim was to secure scheme benefits with an insurer but £3m was unaffordable.
During the exercise, members with liabilities totalling £4.7m transferred out of the scheme. The assets that were removed from the scheme in respect of these transfers were £2.6m.
The client had therefore reduced their buyout shortfall to £0.9m.
There was a cost to the client for running the exercise and offering enhancements. The client paid out a total of £1.1m in transfer value ‘top-ups’ and advisory costs, resulting in a ‘net’ saving to the client of £1m.
The client is now monitoring the buyout market with a view to transacting at the first opportunity.
|Cost to scheme||(2.6)|
|Cost to Company||(1.1)|