We’re now in the aftermath of the Aberdeen transfer of the Stagecoach pension from Stagecoach PLC’s to its responsibility.
I know people get fed up uncovering these papers so here is what Adam and his mates are saying!
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What an excellent analysis.
My immediate reaction is that this type of transaction would be much easier to justify with a smaller ceding employer.
The second point would be the willingness of a ceding employer to give up the potential surplus over an appropriately calculated best estimate merely to remove its responsibility towards the pension scheme. In these days where surplus distribution is being encouraged by the Government many of the employer sponsors of the 4000 or so smaller DB pension schemes are bulking at effectively paying the commercial premiums associated with a buy-in/buy-out process.
The analysis refers to a potential moral hazard risk, but company boards have a clear fiduciary duty to their shareholders so the balance of risk versus opportunity changes as a surplus against a realistic best estimate based on actual scheme assets grows.
When consolidation was being discussed in the last decade, I foresaw this type of transaction indeed held out the long term possibility to a company board.
The other possibility that appears to me, and while i have not recently confirmed this, I seem to recall the consolidation consultation envisaged was the sharing of sponsorship between the employer and a consolidation vehicle. This may now be on the radar for some employers / trustees.