Monday, 16 July 2018

    How a buyout brought certainty to Uniq's scheme members

    We look at how a buyout deal brought welcome certainty to the Uniq pension scheme’s c21,000 members

    In December 2011 the trustee of the Uniq plc Pension Scheme secured pension benefits with Rothesay Life in an £830m deal.

    In this case study we look at how the transaction brought welcome certainty to the pension scheme’s c21,000 members.

    Recognising the stressed nature of the Uniq scheme

    The Uniq scheme was a legacy pension arrangement with many issues to resolve.

    In 2009, the scheme had a deficit in excess of £400m, yet it was supported by Uniq plc, whose market capitalisation had fallen to below £10m because of the perception of an insurmountable pension problem. The trustee, Uniq plc and the Pensions Regulator recognised that an innovative solution was required for this stressed scheme.

    rothesay uniq

    By the spring of 2010, the trustee and Uniq plc were unable to construct a realistic and affordable recovery plan to the satisfaction of the regulator. The trustee derisked the scheme’s investments and began initial discussions with insurers.

    The objective was to secure benefits for members at least equal to Pension Protection Fund levels with a regulated insurer, outside the PPF. 

    The deficit-for-equity swap

    Under the chairmanship of ITS, the trustee led the pension scheme through a complex restructuring exercise leading to a ground-breaking deficit-for-equity swap in March 2011.

    The swap was implemented via a regulated apportionment arrangement – this is a tool used only in exceptional circumstances and with the approval of the Pensions Regulator and the agreement of the PPF.

    The deficit-for-equity swap enabled the trustee to take effective control of 90% of Uniq plc’ shares in return for giving up its claim on future funding.

    In conjunction with Uniq plc’s management and the PPF, the trustee then oversaw the sale of the business to Greencore plc. The business continued to trade and jobs were saved.

    LCP and Linklaters supported the trustee in discussions with Uniq plc, the Pensions Regulator, the PPF and other parties.

    The net outcome for the trustee was an additional £101m paid to the Uniq scheme in November 2011.

    Securing benefits with Rothesay Life

    The additional £101m enabled the trustee to meet its objective of securing benefits at least equal to PPF levels with a regulated insurer. The trustee selected Rothesay Life as its preferred insurer following a competitive selection process. Within a week, the trustee was able to lock into advantageous pricing arising from considerable volatility in bond markets.

    Rothesay Life worked closely with ITS, LCP and Linklaters to create a bespoke policy structure that met the trustee’s complex requirements surrounding the data and benefit issues that accompany large legacy pension schemes.

    The insurance policy guaranteed benefits for all members at least equal to PPF compensation. The trustee also benefited from significant flexibility should a top-up above PPF levels prove possible. As wind-up is nearly completed, any top-up that becomes payable is expected to be paid in 2017. Success through innovation and collaboration ITS encouraged an innovative approach to this complex case. The outcome was positive both for members and for employees:

    • The c21,000 members have certainty in retirement

    • The members benefit from a policy with a regulated insurer, outside the PPF

    • The business continued to trade and jobs were saved.

    This outcome was achieved by all parties and their advisers working collaboratively and being willing to test new ground.


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