Hogan Lovells advises Capital Cranfield Trustee Limited on £132 million buy-in with Pension Insurance Corporation plc

The two Tomkins Schemes were both partially bought-in already, but had significant uninsured liabilities for both pensioner and deferred members. As a result of the transaction with PIC all defined benefit liabilities of the Tomkins Schemes have been fully insured. This transaction gives members additional security that their benefits will be fully-paid, since in addition to the support provided by the Gates group, the benefits are insured with a FCA-authorised insurer.  We worked closely with Mercer (the buy-out consultants on the transaction and actuary to the Tomkins Schemes) and Buck (the Tomkins Schemes’ administrator).

The Gates Scheme had a defined contribution section but with a contracted-out guaranteed minimum pension (“GMP”) underpin.  Operating this underpin created complexity for both the Gates Scheme and members.  We accordingly designed and advised the Trustee on implementing an actuarial equivalence conversion process whereby – following consultation with members - the underpin benefits were converted into either a pure GMP, or a pure GMP with additional defined contribution benefits. This involved working closely with Buck Consultants, as the Gates Scheme actuary and administrator.

The Hogan Lovells team was led by London-based pensions partner Edward Brown with support from associates Amol Chalisgaonkar and Kalon Tsang and other specialist colleagues.

Edward Brown said: “The Trustee is a longstanding client of the firm and we are delighted to have helped it insure the benefits of all Tomkins Scheme members, and to have implemented a complex and relatively unusual actuarial equivalence exercise for the Gates Scheme on tight timescales.”

Christopher Clayton, the chair of the Trustee said: “the trustees have over many years been working towards ensuring that the Tomkins Schemes are fully funded and can be secured with an insurance company, to further guarantee the pension payments to members. I would like to thank our professional advisers at Hogan Lovells, Mercer and Buck for their hard work and professionalism to obtain this buy-in arrangement with PIC.”