In the second part of our series looking at what firms did to win accolades at this year's UK Pensions Awards, PP speaks to LCP partner Clive Wellsteed about how the firm won the Risk Reduction Adviser of the Year category.
Video: LCP partner Clive Wellsteed
PP: What does it mean to win this award?
CW: We're delighted to win this award for the second consecutive year, reflecting our approach of helping clients reduce longevity and investment risks in a joined-up way.
We're particularly pleased to have been able to help so many clients reduce risk; LCP was proud to have been lead adviser on 12 of the 21 buy-in and buyout transactions over £100m during 2014. The award is recognition of our hard work to deliver competitive pricing and terms across the board to clients.
It also reflects some of the highlights from 2014 which saw us advising on a range of buy-in market firsts - from the UK's two largest buy-ins for the ICI Pension Fund and Total to the first buy-in over £100m for a section 615 scheme for Unilever. We are just as proud of our work with smaller pension schemes, where we have helped them to access competitive pricing and terms in a market increasingly crowded with larger transactions.
In short, our approach is to push the boundaries and make sure our clients receive independent, practical and solution-focused advice and we are delighted that the award recognises this.
PP: What do you believe sets you apart from your peers and contributes to this success?
CW: LCP has three key differentiators. Firstly we are independent and provide unbiased advice - we don't have products to sell or alliances with insurers or other providers. We simply give the most appropriate advice to satisfy each client's objectives.
Secondly, on insurance transactions, we have a deep and well-resourced team of partners and consultants, all experienced in the area. We pride ourselves on giving clear advice, which helps our clients to be decisive and efficient in achieving their aims.
Thirdly, we are adaptable and innovative - as the risk reduction market evolves, we help our clients find the latest ways of accessing these markets and securing competitive pricing.
PP: What are the key challenges facing your pension scheme clients and how are you helping them address these issues?
CW: As gilt yields stay low, many clients are looking at how they pay down stubbornly high deficits in a way that minimises the chances of the deficits opening up again. This might involve, for example, a ten year plan covering both longevity and investment de-risking alongside the sponsor's committed contributions. The key is for any strategy to be practical, include a combination of opportunistic and time-driven elements and to make sure that longevity risk isn't allowed to become overly dominant as investment risks are reduced over time.
PP: How will you continue to improve your services to pension scheme clients over the coming 12 months?
CW: De-risking successfully is all about being ready to move quickly when an opportunity arises - either through switching assets or increasing hedging when markets move favourably or being ahead of the crowd to access competitive buy-in or buy-out pricing. This is most difficult for buyins and buy-outs, where the preparatory work ahead of any transaction is significant. We are working hard to remove the barriers to transacting quickly, for example, by streamlining the contractual process and using our online scheme-specific insurer pricing tracker, which we added to LCP Visualise last year, to help clients monitor and identify when to approach market.
Extract from LCP's original UKPA submission
LCP has become an authority in risk-reduction strategies and was appointed as lead adviser on almost two-thirds of all buy-ins and buy-outs of over £100m in 2014.
Its innovative approach to buy-ins and buy-outs has seen it deliver a 95% conversion rate on all transactions - 30% higher than the market average.
One example of LCP's innovation over the year is ICI's buy-in - the largest ever completed in the UK.
In March 2014, The ICI Pension Fund - one of the largest and most mature schemes in the UK with around £10bn of liabilities and 82% of members already pensioners - insured £3.6bn of liabilities with Legal & General and Prudential.
The project required LCP to co-ordinate over 50 stakeholders and complete transactions with two insurers simultaneously - and the deal challenged the assumption that only a longevity swap is a viable option for a scheme of this size.
2014 also saw LCP harness medical underwriting to help clients reduce risk cost-effectively.
It uses employee communication and engagement to secure consent for gathering of medical information - achieving an 85% response rate in one recent example - as well as commissioning a third party to gather key medical and lifestyle information from employees. This helps clients identify which, if any, segments of the membership to underwrite, rather than adopting a broadbrush approach.
In addition to this, in October 2014 LCP enhanced its LCP Visualise technology solution with a unique insurer pricing tracker that enables its DB scheme clients to make the right decisions and seize the best opportunities.
The tracker generates daily pensioner buy-in prices, using live assumptions provided by the insurers themselves, helping clients decide with confidence when to approach the buy-in market.
The UK Pensions Awards 2015 Winners' Series
- How LaSalle Investment Management won the Alternative Investment Manager of the Year award
- How LCP won the Risk Reduction Adviser of the Year award
- How LGT Capital Partners won the SRI / ESG Provider of the Year award
- How PIC won the Risk Reduction Provider of the Year award
- How Spence won the Consulting Innovation of the Year award