Scheme buyout – the family experience
25th April 2018
George Vestey, CEO of Vestey Group
Our company scheme had developed and grown considerably over time and, by 2012 our longstanding company pension scheme had liabilities of over £500m. As a key influence on the company balance sheet, the strategy for the scheme was an important part of our discussions for the future of the company – especially when it came to the issue of sustainability in a changing market in the years to come. After some planning around the direction of the business, encompassing our thinking around everything from investment to succession, it was felt that the current solid ongoing funding position provided an opportunity to act in the short term to remove a potentially very volatile asset from the company - if a targeted strategy was put in place.
As a result, and together with the key employers and stakeholders in the business, we recognised a need to develop a strategy that had one ultimate objective – to remove the risks associated with the scheme from the company. It was obviously important to the family that we kept our promise to members for their benefits in the future, indeed that we sought to enhance them.
Nevertheless, the subsequent creation and implementation of the strategy with our professional advisors was a lengthy process, in some cases with us working to bring their own views into line with our buyout and de-risking goal where they had put forward another path. At this point when hearing other ideas, it is important to evaluate whether any present a compelling case to altering your endgame and, if not in your view, then stick to your guns and ensure that your advisors are working in the direction you want them to go. There may be vested interests in other options after all.
What followed was a decisive 18-month period for the company, where with an alignment of views on behalf of the family and employers meant the scheme’s governance strategy, data standards and investment decisions became geared towards this new aim and discussions with potential insurers took place. Eventually in June 2014 our planning meant that via a number of buy-ins we were able to finalise a full buyout with an insurance company without having to make an additional contribution ourselves.
This was made possible through hard work, diligence and considered discussions amongst the scheme’s stakeholders and, whilst there were of course bumps in the road, having a consensus of views that the end result would be favourable to all concerned was vital to the success of the strategy. It allowed all parties to instruct their advisors to bring company and scheme activity into line with regards to the path we wanted to take and to communicate with members to ensure they felt comfortable in the future security of their benefits.
We have always considered the long-term sustainability of the business to be our core focus and the pension scheme had begun to play a big role in that outlook – both for the near future and in the next generation of ownership. Once we agreed that the best interest of all involved would be met by securing the scheme with an insurance company, the all-important strategy became a key part of all business decisions for almost two years.
Thanks to the dedication of the specialist team put in place and all those involved in the process, we were delighted to enhance the benefits of our members and meet all of the costs of the project from inside the scheme. We are proud of maintaining our philosophy of caring for our staff, even when required to be more pragmatic about sustainable business needs. It has now allowed us to put the Vestey Group in a strong position for dealing with what the future holds.
- Identify what role your scheme plays in the future of the company and how it may affect your plans in the areas of sustainability and growth
- It is crucial that the family, associated employers and scheme manager are all aligned with their strategic view
- Ensure the strategic end point is the sole focus and that planning is not altered each time there is a bump in the road or a suggestion from an advisor with a vested interest
The Vestey Group are a family-owned food and farming business and we have been trading for over 125 years. Over the course of the last 40 years, our final salary scheme had grown to include members from more than 200 companies that had been part of our history and, as with many similar schemes, had developed a level of liabilities that outweighed the size of the company itself. As a result, we set out on a strategic path to secure all members’ benefits with a regulated insurance company and to find a solution that enabled the company to remove a significant risk from the company for the future.
To find out more about pension schemes, including how to set a pension strategy within the wider succession plan, the fundamentals of undertaking a buyout and how to ensure the next generation are ready for their pension responsibilities, don't miss our upcoming webinar.