Partners in Confidence: Securing a buy-out for the SPM Plastics Pension Scheme, a small DB scheme

The Client: Sponsoring employer SPM Plastics

Understanding the client challenge

Quantum Advisory recently helped the SPM Plastics Pension Scheme, a c.£4m pension scheme, buy-out with Just Group. This secured full benefits for all 38 members, both deferred and pensioner members.

Risk management has always been important for SPM Plastics Ltd, the Employer sponsoring the Scheme, therefore an enhanced transfer value (ETV) exercise in 2018 had already helped to reduce ongoing risk and future transaction costs.

After a corporate transaction at the Employer and the opportunity following the rise in government bond yields in 2022, the Employer wanted to secure member benefits in full, as the Scheme’s expected buy-out deficit had reduced to a level that the Employer could be willing to fund. The Trustees (independent trustee Chris Maggs and lay trustee Neil Parsons) and the Employer agreed to explore a buy-in, with a plan to move to buy-out afterwards. 

Providing a big name service on a first name basis

Through 2023 and 2024, Quantum Advisory led the Scheme’s risk transfer journey end-to-end, delivering a seamless transition from buy-in to buy-out. The Firm provided the Trustees with actuarial, administration and investment services and worked closely with the Trustees, the Employer, the Insurer, and other advisors to ensure a smooth journey. 

Although there were many factors that contributed to a successful buy-out, there are a few key points that were particularly relevant to the Scheme:

• Investment Price lock
  Quantum Advisory recommended the Trustees amend their investment strategy to better match insurer pricing, including a mix of corporate bonds and liability driven investments (LDI) to provide a 100% hedge against interest and inflation rate movements. The revised strategy was implemented to align with insurer pricing.   
  
  
• Data Quality
  Data quality and thorough preparation were pivotal, from the detailed administration checks undertaken, to ongoing reviews and mortality tracing. This gave insurers confidence and helped avoid surprises during the data cleanse. Quantum had been the administrator of the scheme since 2017 and had performed an extensive review of the data provided by previous administrators. The high-quality data led to a smooth data cleanse with the insurer after the initial buy-in.

• Collaboration or parties
  The Trustees and Employer maintained a strong partnership, both wanting to secure the benefits of members with an insurer. Fortnightly calls between them and Quantum Advisory allowed for quick and efficient decision-making with the main parties present.  Just Group and the Trustees’ legal advisors would join the calls to answer queries or provide additional information when needed. Furthermore, Quantum Advisory was providing multiple services to the Trustees, therefore minimising the time spent and expenses co-ordinating with additional third parties.

Client impact

The main priority of the sponsoring employer SPM Plastics was to secure long-term benefits for its scheme members. Through early engagement on investment strategy and strong collaboration between all parties, a smooth and cost-efficient transition from buy-in to buyout for the scheme and its members was completed. 

Peter Belson, Corporate Controller at SPM Plastics Ltd, concluded:
“Securing the long-term benefits of our scheme members was a key priority for us. With Quantum’s expert guidance and collaborative approach, we were able to manage the process confidently and deliver a great outcome for everyone involved. The whole transition was carefully managed and carried out with the attention, care and diligence our members deserve.”

Chris Hall, Head of Post Transaction Services at Just Group, commented:
“This transaction is a great example of how early preparation and strong collaboration between all parties can deliver real efficiencies. The high standard of data and clarity of communication from Quantum and the Trustees meant we were able to proceed with confidence and meet the Scheme’s objectives effectively. We’re very pleased to have secured the benefits of all the scheme members”.

The Trustees added:
“Working with Quantum on this risk transfer was a very positive experience. They navigated the process from start to finish with professionalism and attention to detail that made it a smooth and successful journey.”