How a hybrid DC scheme tapped into the bulk annuity market

The Mouchel Business Services Limited Pension Scheme, sponsored by Kier Group, accrued benefits under a DC arrangement but with a promise that members’ pensions would be topped up “if the value of their defined contribution pot was not sufficient when they reached retirement”, according to consultancy group Aon, which advised on the deal.

While Kier Group and the trustee board were keen to derisk the £13m scheme, Aon said the underpin structure “made it challenging to secure an insurance solution”.

Members were consulted and the form of their benefits was altered so they could be transferred to the Smart Pension master trust for DC accrual. It has an existing relationship with Just Group, meaning the trustees were able to access an insured option to support the underpin.

The 220 scheme members were also supported with educational materials and access to free independent financial advice throughout the consultation process.

Curtis Mitchell, a professional trustee at Vidett and a member of the Mouchel scheme trustee board, said: “Due to the complexity of the scheme, this was no normal risk transfer exercise. Aon was instrumental in ensuring that the exercise was completed to plan in line with our objectives, and in providing or arranging all necessary requirements for the project.

“The project also required a significant level of legal advice, provided by Hogan Lovells. This legal advice was concise and delivered on time, which was important for ensuring the project progressed as desired.”

Russell Powles, associate partner and head of Aon’s underpin team, said the transaction required “an innovative and collaborative solution”.

He added that communication and member support were “vital to the success of the exercise”, with members able to “consider their options and to choose the shape of benefits that would best suit their needs”.