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Quantum Advisory completes a buy-in transaction with Legal & General | Case studies | Quantum Advisory

Quantum Advisory completes a buy-in transaction with Legal & General

Background 

Our client was an agricultural supplier based in the Southeast with a large foreign parent company. Quantum Advisory had provided pension consultancy support to the Trustees since 2012 and in 2019 the Trustees also appointed Quantum to deliver Pension Administration, Secretarial and Actuarial Consultancy services. The significant increase in gilts yields over 2022 resulted in the scheme not only being fully funded on a funding basis but also an estimated solvency basis. The parent company requested that the Trustees and Quantum therefore work together to investigate the possibility of securing the benefits through a buy-in with an insurance company. 


Preparatory work 

Quantum had previously carried out a significant amount of work for the Trustees in respect of correcting historic errors in the calculation of the members’ benefits and therefore we were confident in respect of the high quality of the Scheme benefit data. We worked with the Trustees and their legal advisers, Mills & Reeve, to produce a detailed benefit specification as well to consider how the Trustee discretions in the rules should be treated once the buy-in transaction was completed. At this time the Trustees also appointed Quantum to provide investment advice so to protect the funding position. 


Investment work 

Once the decision had been made to secure benefits through a buy-in, Quantum and the Trustees immediately began work to align the investment strategy with insurers pricing. The Trustees compared and contrasted the different approaches available to them and it was decided that Quantum would design a buy-out focused solution utilising the Legal and General Investment Managers (“LGIM”) Buyout Aware Fund range. 

The fund range is a straight forward, low governance solution for Scheme’s looking to better align investment strategies. Quantum’s in-house strategy team used the pooled funds in the suite, to design a high interest and inflation hedge relative to the Scheme’s liability profile. Credit allocations are also considered a key allocation in many buy-out portfolios, credit is managed within the fund range and leans on LGIMs relationship with L&G in order to better equip Scheme’s preparing for transactions. With the funding position of the scheme protected and the preparatory work in place we were able to approach the market and ultimately secure a buy-in for the Trustee with Legal & General. 

Darren Wateridge, Principal Consultant and Actuary at Quantum Advisory commented: 

“It has very much been a pleasure working with the Trustees, Mills & Reeve and Legal & General to secure the buy-in policy for this scheme”. 

Fiona Jaffray, Pricing and Strategy Actuary at Legal & General said: 

“Our streamlined approach for smaller schemes, including novation of the scheme’s LGIM assets as premium payment, coupled with the straightforward and collaborative process run by Quantum Advisory led to the smooth and highly efficient completion of the transaction. We’re pleased to have supported the Trustees and its advisers in securing the benefits of the scheme’s members.”