Securing a buyout is a lengthy process for a small scheme as the PLSA found out

Despite being an organisation that “lives and breathes pensions” the buyout process was not simple for the Pensions and Lifetime Association’s DB scheme.

Joanne Segars, chief executive of the PLSA explains: “We luckily had commitment from the sponsor and from the trustees, so that made working it through that much simpler.

“Notwithstanding that, it was a lengthy process and there were all sorts of details that we hadn’t thought we would ever need to think about that we suddenly found we needed to consider.”

Joanne Segars PLSA

Being a smaller scheme the trustees also had to cope with a lack of interest from some insurance providers. Segars said: “One of the issues for us was that we’re a small scheme and so therefore the range of opportunities for us in the market was quite limited.

“We looked at some [alternatives] but there are providers who will just say - well you’re too small.”

Eventually the scheme secured a deal with the Pensions Insurance Corporation to secure all the members DB benefits.

This did not come cheap. As Segars puts it: “It’s not a trivial exercise and the cost is not trivial.” The Association made an additional contribution to the scheme of £4,717,314 on 30 April 2015 using up a substantial part of its reserves.

First of all take a deep breath because it’s going to take a lot of time”

In the latest annual report, chair Lesley Williams commented: During the year we agreed the buy-out of the defined benefit scheme liabilities with Pension Insurance Corporation. This required us to use a substantial part of our reserves but has removed by far our largest financial risk.”

Communications were also a key concern for the scheme. Segars explains: “One of the things we spent a particularly long time thinking about was the communication that we needed to do with staff.

“Despite the fact that we are the PLSA and many of our staff know about pensions… we wanted to make sure that we had open communications and [staff had] the ability to ask questions. We spent quite a long time thinking about how we did that from an employer perspective.”

She has good advice for other small schemes thinking about going through the buyout process. She says: “First of all take a deep breath because it’s going to take a lot of time. Make sure you’ve got all the information you think you’re going to need and spend time thinking about how you’re going to communicate well to staff.”

Employees at the PLSA now save into a mastertrust with extremely generous contributions. Members who put in 5% of their salary will receive 15% from the association.

Segars concludes: “We’re an organisation that lives and breathes pensions, so when we closed the DB scheme, it was really important to us - not just because of that but also because we want to be a good employer - to make sure that we put in decent contributions into the DC scheme.”