A flexible mindset

KION Group’s £250m bulk annuity transaction

Over the last couple of years, we’ve worked hard to develop our capabilities because we strongly believe in enhancing pension schemes’ financial security, regardless of their size. KION Group’s £250m bulk annuity transaction is a key example of how we can navigate and overcome challenges and use our solution-focused mindset to deliver smooth processes for Employee Benefit Consultants (EBCs) and trustees. 

Overview

• Size of the scheme –5 schemes with combined premium of £250m
• Members – Circa 3,000
• Timeframe – 6 weeks from exclusivity to signing
• Challenges – Multiple schemes with different benefit structures

Our knowledge of the KION schemes began with receiving the Request for Quotation from Mercer, the EBC. We were very keen to offer our services to these trustees and members and following a thorough triage of the five scheme specifics, we made a note of their differences and synergies to identify the best approach. 

A competitive auction was held in the market, and the pricing received was at a level where trustees and advisers were comfortable that the transaction could proceed. Given the strong pricing we put forward, and the wider aspects of our proposal, we were the chosen insurer and were thrilled to support the trustees, company and its c3,000 members on its de-risking journey.

"We look forward to working on future transactions with the Canada Life team"

Nichola Price, Principal in Mercer’s Risk Transfer team

What were the opportunities and highlights?

• Complexity as a catalyst for innovation
• Agile delivery
• Innovative contract solutions

The scheme benefit specifications and data schedules were well prepared, clear and could be read easily together. However, a project being made up of multiple schemes presented complexities. The main challenge we faced was that there would be multiple benefit specifications and data replay schedules for the trustees to review. We were also conscious that given the timescales, we had to find a solution to avoid any delays for the trustees. So, we had to find a way to provide a streamlined process for all five schemes and deliver in the same timeframe as one. 

The first step was thinking of how to simplify the process for the trustees. We worked closely with Mercer on this and, after consulting our legal team and Eversheds, we agreed that we would need to change the architecture of the contract. We collaborated with these legal experts to gather a vast amount of information and created one quotation document and policy terms for signing. The quotation document incorporated all five schemes and gave the trustees a detailed overview of the schemes, all in one place. 

"It’s a great example of how teamwork helps achieve pension scheme objectives."

Maurice Speer, Partner in Mercer’s Risk Transfer team

How did we approach it? 

Engagement from teams throughout 
Mercer led the process overall to ensure the right parties were collaborating at the right times.  We played our part by creating a clear roadmap from our insurer perspective and outlining from the beginning who was needed to ensure we had the right expertise in the room. To keep a clear view of the progress we were making, we also scheduled with relevant parties to check progress, discuss solutions to issues and report back.  This included administration and investment teams, as well as legal. 

Clear communication with Mercer 
Having an open and clear dialogue with Mercer where they set clear objectives and deliverables, allowed us to discuss the challenges of having a project with multiple schemes to consider.  Mercer worked with us to streamline our project management approach to enable us to work efficiently and they were able to provide pragmatic solutions where needed to ensure the project could continue.

Simplified contracts
We were working to tight timescales driven by company objectives, so we leant on the expertise at Eversheds to design simplified contract structures to support the safe navigation through signing.

What was the result?

While this transaction was complex, it was an incredible learning opportunity that allowed us to think outside of the box.  Strong project management and awareness of the end objective from Mercer, and our close partnership with them throughout, enabled us to adapt our approach for multiple scheme transactions going forward.  Through collaboration and an agile way of working, we were able to simplify the process and provide a smooth journey for the trustees, Kion, and members.  Through this experience, we know that we’re better placed to accommodate complex transactions in the future. 

“I’m thrilled to have been a part of this project. It’s a fantastic outcome for the company, the trustees, and Canada Life. Maurice and Nichola at Mercer were a pleasure to collaborate with. This project presented a unique learning opportunity, as we managed to integrate five separate schemes into one project, necessitating significant modifications to our policy terms and quotation document structure. I eagerly anticipate the possibility of working with Maurice and Nichola again on similar complex projects, having gained valuable knowledge and expertise that will undoubtedly benefit other projects in the future”

Natalie Keeble Business Development Manager, Canada Life

“It's always a great feeling when we win any transaction, knowing that we are securing benefits for another group of pension scheme members – but it was particularly pleasing to get this one across the line given we were dealing with 5 different underlying schemes.  It was great to see my team rise to this challenge and to also see some of the process improvements that we’ve been working on in the background come into play.  It meant that we could share additional pricing information along the way without delaying the overall transaction.  We are well set up to be able to do more of the same.”

Shyamal Bala, Head of BPA New Business Pricing, Canada Life

“We are proud to have advised the Trustee on this complex, multi-scheme transaction with Canada Life.  This started with a patient and diligent market preparation approach over the last 2.5 years, with a focus on essential data and benefit preparation; market approach strategy; and clearly defined success criteria upfront.
With the schemes packaged together, a competitive process achieved very attractive pricing for all schemes.  The transaction completed within tight timescales due to the partnership approach between Canada Life, Mercer and the trustee and company along with their respective advisors.”

James Double, Client Director, Vidett, commented

“We have been a  professional trustee to KION Group schemes since 2016 and have been working closely with KION during this intensive project to achieve this greater security for members’ benefits. This has been a complex transaction and we’ve worked collaboratively with Mercer, our other advisers and Canada Life to proactively find solutions to issues that emerged along the way. It’s a great example of how teamwork helps achieve pension scheme objectives.”

Maurice Speer, Partner in Mercer’s Risk Transfer team

 

“This transaction was particularly interesting due to the complexities brought by multiple schemes transacting at the same time.  Whilst this brought additional challenges to the table, we were able to adapt our approach, aided by the close collaboration with Natalie and the Canada Life team, to achieve the best outcome for all parties, whilst still meeting required timescales.  We look forward to working on future transactions with the Canada Life team, especially now they are set up to handle this type of complex, multi-scheme transaction.”

Nichola Price, Principal in Mercer’s Risk Transfer team