PPF-plus buy-out

Case studies

We helped MIRA to complete a £70m PPF-plus buy-out, putting members’ interests first

MIRA's objective was to secure benefits in excess of PPF compensation for all members, with the protections of a regulated insurance company.

The background

MIRA Ltd - the Motor Industry Research Association - was the sponsoring employer of the MIRA Retirement Benefits Scheme (MIRARBS) and
participated in the Universities Superannuation Scheme (USS). The size of the pension obligations relative to the business was such that the trustee and MIRA concluded that a corporate restructuring was necessary to protect members’ benefits.

Without a corporate restructuring the most likely outcome would be eventual company insolvency, with the pension plan falling into the PPF.

Our solution

Our approach was a debt compromise and PPF-plus buy-out:

  • MIRA sold its business and assets to HORIBA, a Japanese company. The sale proceeds were divided between MIRARBS and the USS in agreed proportions
  • LCP conducted a buy-out insurance process simultaneously with the business sale process. The pension plan’s share of the sale proceeds were used to enter into a £70m buy-out contract with PIC, securing benefits in excess of PPF compensation
  • Innovative price-lock mechanism using leveraged gilt funds to lock the buy-in price relative to the pension plan’s assets plus expected sale proceeds. This provided certainty on the level of uplift that could be secured until the sales proceeds were received and the buy-out completed
  • The pension plan compromised the statutory debt due from the sponsor, which rendered the pension plan ineligible for the PPF but meant that the insurance contract with PIC could be entered into immediately

The results

The Trustee of the MIRA Retirement Benefits Scheme (MIRARBS) used its share of the proceeds of the business sale of MIRA Ltd to secure members’ benefits at a level in excess of Pension Protection Fund (PPF) compensation via a £70m buy-out transaction with Pension Insurance Corporation.

The robust insurance process, led by LCP, led to very competitive pricing and risk transfer. The alternative would have been to fall into a PPF assessment process, which would have prolonged the uncertainty, added to costs and so depleted the assets available to provide benefits to members.

Chris Martin - Independent Trustee Services, a director of the MIRARBS Trustee