Case Study Three
The background: our client and its situation
We were appointed as sole trustee of a pension scheme where there had been a history of difficult relationships between the trustees and the employer – all understandable but embedded in history. The employer is a large international industrial business, private equity owned, which has recovered from a challenging period to become stable and profitable.
The issue and our goals
- The valuation 15 months’ deadline was almost upon the Scheme
- The cost of running the Scheme was disproportionate to its size
- A number of key issues such as equalisation, balance of powers and indexation had not been resolved
- The investment strategy was not fit for purpose
- The employer structure was complicated and unwieldy
How we manage the issue
- We engaged on a real time basis in contrast to the previous board which had stacked up issues from one trustee meeting to the next
- We focussed on the important issues and shelved a lot of the inconsequential noise
- We created a budget for the operation of the scheme and managed costs using a simple approval system
The Result
- The valuation was completed within the 15 months’ deadline for the first time in three valuations. A three-year recovery plan was agreed leading to self sufficiency
- The cost of running the scheme has been more than halved, saving a substantial six figure sum
- Key legal issues have been clarified and corrective action taken by detailed work with the existing legal adviser
- An investment strategy has been agreed to reduce volatility, hedge unrewarded risks and deliver returns consistent with the covenant strength and the move to self-sufficiency
- Through an FAA we have simplified the employer structure, improved the covenant strength and reduced the PPF levy
Overall the relationship with the employer has moved from a combative nature to a constructive one with respect between the parties