Western Pension SolutionsWestern Pension SolutionsWestern Pension Solutions
  • HOME
  • ABOUT US
    • WHO WE ARE
    • WHY WE ARE DIFFERENT
    • OUR TEAM
    • BE PART OF THE TEAM
  • WHAT WE DO
    • STRATEGIC PENSION ADVICE
    • HOW WE WORK WITH CLIENTS
    • OTHER SERVICES
  • OUR STORY
  • LATEST
  • CONTACT US

due diligence is the key to a successful buyout

29th September 2016Publicationsadmingav

Group head of reward Ben Fowler at family owned company Vestey Group explains how they took a multi-step approach to de-risking, culminating in a buyout

Family-owned food and farming business Vestey Group de-risked its £500m 14,000 member Western United Group Pension Scheme over the course of three bulk annuity purchases, culminating in a buyout.

Two pensioner buy-ins, one for £115m in 2011 and one for £111m in 2014, were combined with the remaining £280m of scheme liabilities to complete a full buyout in June 2014.

Prior to de-risking, the scheme’s £500m assets vastly outstripped the company’s £100m value. While the scheme was well funded and prudently run, both the sponsor and the trustee board could see the risks posed by such a disparity, particularly in the aftermath of market turbulence in 2008.

The buyout was the final phase of a long-term de-risking process which had seen the scheme convert its growth assets to protective assets such as gilts, cash and LDI strategies whenever suitable trigger levels were hit. By May 2013, almost all of the scheme’s assets had been converted in this way and the scheme was in an almost fully funded position on a gilts-matched basis. “That gave us the platform to look at further de-risking options,” says Ben Fowler, group head of reward at Vestey Group.

Once the scheme started carrying out its pensioner buy-ins, this opened up other opportunities. “We found that once you are in the process of completing buy-ins, you are then in the market for other de-risking activity,” says Fowler. On paper, the scheme was around 5-10 years away from being able to complete a full buyout, but favourable solvency levels combined with suitable annuity prices enabled the company to transact in June 2014.

Having carried out its first two buy-ins with Rothesay Life, Vestey Group knew the company well, and understood its processes.

The decision to de-risk meant bringing together a diverse range of views from within the trustee board and the family-owned company. “However, in the end everyone came to the view that it was not in the interests of the company to have such a big disparity [between the company value and scheme deficit] and that it wasn’t healthy for the scheme to be relying on a sponsor that is one-fifth of its size,” explains Fowler.

“It’s easy to underestimate the number of steps involved in completing a buyout – we are still in wind-up now” says Fowler. “No matter how much work you accomplish in advance, there will still be a lot to do.” However, all the hard work has been worth it, with Fowler reporting a positive response from members. “As a family business, we were concerned about that.”

Fowler says that the close-knit family structured supported the ability to transact quickly: “We could decide within minutes on what we would do – that might not be the case elsewhere. There was good preparation, a good counterparty and we knew we would follow through.”

Vestey Group and Rothesay Life’s thorough due diligence meant that the scheme has a great deal of certainty and there are unlikely to encounter problems during the wind-up. “We went through all risks so there would be no lingering liabilities. The due diligence is very intense. Whatever prep you have done, there will still be more scrutiny. I’d advise anyone considering a buyout to find out as much as they can in advance, so that the process doesn’t derail or disappoint.”

One of the many positives to come out of Vestey Group’s experience has been Western Pension Solutions, a consultancy firm specialising in helping other family businesses to work through the same processes that the Western United Scheme has undergone. “Family businesses – especially multi-generational families – have a long-term focus and a desire to pass down the business. But they don’t want to pass down legacy challenges like a pension scheme to their children. We can help them to work through that”.

“The really important thing was that everyone was happy at the end,” concludes Fowler. “There was surplus revenue so members even got a discretionary one-off increase. Shareholders are delighted, and the company is unshackled by its pension scheme.”

The original article appeared in Engaged Investor

Tags: Due diligence

Recent Posts

  • Our thoughts are with His Majesty and the rest of the Royal family
  • Recognising The Importance Of Family Business Leadership
  • Sydney Packett & Sons DB Pension Scheme Completes £5m Buyout With Aviva
  • Family Firms Remain Backbone Of The UK Economy
  • Adding Our Voice To The Latest Pension Consultation

Archives

  • September 2022
  • August 2021
  • March 2021
  • September 2020
  • June 2020
  • March 2020
  • January 2020
  • December 2019
  • October 2019
  • September 2019
  • August 2019
  • June 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • August 2017
  • September 2016

Categories

  • Careers
  • DB Pension Schemes
  • Events
  • Insight
  • Next Generation
  • Press releases
  • Publications
  • Regulation
  • Research
  • The Herrtage Library
  • Uncategorised

Western Pension Solutions
1 King’s Arms Yard
London
EC2R 7AF

+44 (0)20 7726 2718
pensions@vestey.com

WESTERN PENSION SOLUTIONS LIMITED IS A LIMITED COMPANY REGISTERED IN ENGLAND. COMPANY REGISTRATION NO. 11717816.

1.0.0.20
1.0.0.20

REGISTERED OFFICE: VESTEY HOLDINGS LTD,
29 ULLSWATER CRESCENT, COULSDON, SURREY, CR5 2HR.

1.0.0.20
Western Pension Solutions © 2022 | Privacy Statement | Website terms of use | Cookie Policy | Modern Slavery Statement
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
CookieDurationDescription
cookielawinfo-checkbox-analytics11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checkbox-functional11 monthsThe cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checkbox-necessary11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-others11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-performance11 monthsThis cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy11 monthsThe cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytics
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.
Others
Other uncategorized cookies are those that are being analyzed and have not been classified into a category as yet.
SAVE & ACCEPT