PwC advises on £2.5bn ‘landmark’ pensions scheme buy-out for automotive firm TRW

ACCOUNTANCY and advisory firm PwC has advised on a pensions buy-out solution for automotive firm TRW – believed to be largest such buy-out in the UK to date.

PwC’s pensions team was the corporate advisor to TRW Automotive – which has an operation in Solihull – for the pensioner offers which helped to facilitate its £2.5bn partial buy-out transaction with Legal & General for 22,000 retired members of its UK defined benefit pension scheme.

The deal allows TRW to transfer all risks associated with these members to Legal & General and away from the company’s balance sheet.

The arrangement included a number of innovations as part of the broader risk management strategy for TRW’s pension scheme. PwC’s pensions team advised TRW on its initial strategy for the pension scheme, devised the pension increase exchange offer levels, calculated personal offers for all members and prepared the pension scheme member data for the deal.

The successful execution of a pension increase exchange in the buy-out deal made it possible to remove a significant portion of TRW’s pension liabilities at an “acceptable cost”.

This involved giving members the option to receive a higher level of non- increasing pension income in place of inflation linked income, coupled with the promise of their pension being secured with Legal & General.

Jeremy May, pensions partner at PwC in the Midlands, said: “This is a prime example of a company that wanted to secure benefits for all their pensioners and remove the financial uncertainty on their balance sheet, but knew the cost would be unviable without an innovative approach being adopted.

“We were able to play a lead role in the solution which reshaped the benefits – this meant an affordable solution for TRW and secure pension benefits for its members which were shaped to meet their personal needs.”

The pensions team at law firm Eversheds also advised TRW Automotive on the deal.