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Banks and insurance companies

Overview

At a time when the cost of providing a pension scheme to employees seems to be rising without limit, employers are increasingly looking for new ways to fund their scheme and to give comfort to the trustees about the security of the employer's pension promise. As a result, employers and trustees are increasingly needing to enter into complex banking and insurance agreements, such as:

• insolvency insurance documentation, which may provide a payout to the pension scheme in the event of the employer becoming insolvent
• letter of credit being provided in favour of trustees from a bank, with the cost being met by the employer
• trustees buying annuities to transfer the funding risk in relation to some or all of a scheme's liabilities to an insurance company.

Banks

The challenge for employers and trustees

It is becoming increasingly common for employers to offer some form of security to the trustees of their pension scheme. Any security must be documented very carefully and it will often be the subject of complex negotiations, particularly where a bank is involved. 

Whenever security is given by a company it is important that it considers the impact on any existing security that it has granted and on its existing banking arrangements.

How we can help

Our pensions and banking teams have advised in a number of situations involving banks, where some form of security was granted in favour of pension scheme trustees. This experience, together with the combined expertise of our pensions and banking teams, places us in a strong position to provide prompt, focused advice to employers and trustees exploring different forms of security for their scheme.

Insurance industry

The challenge for employers

Insurance companies are increasingly offering different ways in which the risk of funding pension liabilities can be transferred to them. This often means trustees buying an annuity but it can also involve other insured products being bought by trustees. These options can be expensive, and it can be difficult for employers and trustees to know if they are getting value for money.

How we can help

We have been at the cutting edge of advising insurance companies, employers and trustees about the new ways in which risk in relation to pension liabilities can be transferred to insurance companies.

Our pensions and financial services teams have drafted the pensions insurance policy documents for a number of leading insurance companies and have a very detailed working knowledge of the products available and their relative merits.

We also advise one of the leading companies in the emerging buy-out market. Therefore, we are well placed to advise trustees and employers on the issues and on how to get the best deal.