Buyout Process

We recognise that pension risk transfer through a bulk annuity is a new and typically one-off experience for many employers and may include a complex set of tasks and considerations. The process requires interactive partnering among the employer, trustees, their respective advisers, and at a later stage, the bulk annuity provider.

MetLife Assurance’s experience and disciplined team approach helps ensure close interaction and the efficient transfer of scheme benefits – while providing scheme members the service they deserve.

We have outlined below the major steps typically included in the process – from actions that can be undertaken well in advance to embarking on this process through to implementation.

Member Options

You may wish to offer the scheme members some alternative options to ongoing scheme membership, such as enhanced transfer values for deferred members.

Stakeholder Involvement

Although the trustees are typically the primary decision makers in the move to securing scheme members benefits through an insurance contract, the process should seek to achieve a consensus among all key stakeholders. You are a particularly meaningful stakeholder, especially if additional funding is required to facilitate the insured solution. Planning the route to buyout is likely to include a number of other parties, such as trade unions, scheme administrators and investment advisers to name but a few. All stakeholders should know the purpose of the buyout and the impact of the change on their own responsibilities.

Feasibility Study

Typically performed in conjunction with your and the trustee’s consultants, the purpose of a feasibility study is to establish goals for the company and the pension scheme, which may include a number of de-risking options including buyout. Various factors are considered, such as risk management objectives, funding levels, and financial objectives. The feasibility study should help narrow down the range of options that you and the trustees wish to explore and if a buyout is under consideration, the process could include the steps below.

Request for Quotation

In order to produce a quotation, data must be provided to the bulk annuity provider including information on scheme members, such as salary / pension, age, gender, postcode, etc. See our article on the importance of data in our Knowledge Centre – Route to Buyout: Preparation is the Key to Success. During this step, quotes are requested from several providers, the list of which would be determined as part of the feasibility study.

Bid Review

In collaboration with the trustees and your respective advisers, the tender process includes a review of several quotations and subsequent selection of a few providers to produce updated and final quotations.

Finalist Presentation

The select few providers present their final quotation and their capabilities including an organisational overview, discussion on financial strength, administration and service.

Bulk Annuity Provider Selection,

Based upon the finalist presentations a bulk annuity provider is selected. The selection criteria typically includes price, insurer strength and security, service capability and the ability to tailor a solution for your scheme.

Contract Negotiation

Negotiations with the bulk annuity provider commence to agree to the particular policy conditions. See our discussion on a “same-day transaction”, a variation of the sequence of these steps in our article, Buyouts and Financial Volatility located in our Knowledge Centre.

Implementation

The implementation process typically includes the following steps. Key stakeholders in the process will include the employer, trustee, bulk annuity provider, actuary, consultant(s) and adviser(s), and the current pension payroll provider.

Ongoing Administration

Once implementation commences, scheme members become policyholders. MetLife Assurance is dedicated to ensuring our policyholders receive the benefits secured for them and their dependants throughout their respective lifetimes.

The process described above changes minimally if the trustees decide to partially secure their members’ benefits through a buy-in but crucial considerations are similar.

For more information on the Buyout process please visit www.trusteetoolkit.com