agreeing assumptions for actuarial valuation
the challenge
The trustees of a final salary pension scheme were being asked
by the overseas parent company to adopt less prudent assumptions
for the actuarial valuation and investment strategy than they had
previously used. In return, the overseas parent was willing
to offer a guarantee for a defined period – although this would be
reduced by the annual contributions made to the scheme by the UK
company.
our approach
We discussed the trustees’ concerns, and those of the pensions
advisers, who preferred a less risky approach. Following our
discussions, we negotiated a guarantee from the overseas parent
company that gave the trustees comfort and was also acceptable to
the UK company. We also advised on whether the guarantee
would be enforceable under non-UK law.
the results
The guarantee obtained from the parent company was for a longer
period than had originally been offered and was structured to be
enforceable under both UK and non-UK law; the trustees felt
comfortable in adopting less conservative assumptions for the
actuarial valuation and investment strategy.