CII completes buy-in of employee pension scheme to Legal & General

While the scheme has accumulated funds over the years towards meeting its liabilities the responsibility for meeting those liabilities rested with the CII as the principal employer. This meant that the CII had to seek to 'make good' any shortfall between assets and the total amount due to retirees. The shortfall could increase due to stock market fluctuations or changes to pension legislation, for example. Over the years the CII had to make significant additional contributions to minimise these shortfalls and the money for this came from our reserves.

In 2018 we sold our office building, known as Aldermanbury. The building asset was considered a key part of the covenant, or security, for the DB scheme. At the time of sale, which raised £19m after relocation costs and fees, the CII committed to attributing at least half of the proceeds from the sale to meeting the DB scheme liabilities. We initially paid £3m for the benefit of the scheme and set aside a further £5m in an escrow account. We have since paid into the scheme £2m from the £5m in escrow, over the last two years. The CII committed further that any remaining amount from the proceeds of the property sale, after finalising matters for the pension scheme, would be put into a long-term fund for the benefit of the future of the organisation; this has also been done.

The DB scheme Trustees approached the CII to consider a buy-in. A buy-in is where the assets of the scheme are transferred to an insurer and scheme benefits are secured by that insurer. This eventually removes the liability from the employer and we will, therefore, no longer be required to make cash payments in to the scheme. By completing a buy-in we remove uncertainty and risk from our organisation, which means funds generated can be attributed to the future benefit of members, students and corporate customers rather than being used to meet past pension liabilities. A buy-in will also remove the considerable administration costs of running the DB scheme.

After a comprehensive selection process by the Trustees, Legal & General was the insurer selected to undertake a buy-in. Legal & General offered the best terms that match the scheme benefits. After waiting for market conditions and pricing to be more favourable we have now completed the buy-in transaction, which has required a further £3.2m (plus the remaining £3m from the escrow account) to be paid to Legal & General. To complete the buy-out next year, which provides full and final removal of any further financial responsibility from the CII, we anticipate approximately £1.7m more will be required, and we have provisioned for this.

It is important to note that most of this money would have been required to be paid into the scheme anyway to 'top-up' the fund, but by securing the buy-in/out nothing further will be required from CII in the future. The CII has been planning for a potential buy-in/out as part of our financial management and following this transaction the Group continues to hold sufficient reserves to meet our ongoing business requirements.

Achieving this outcome has been the end result of a long-term strategic plan for managing the DB scheme, developed and supported by both the Trustees and the CII Board. This new arrangement will secure the future benefits for scheme members and help to secure the future of the CII.

• Read a copy of the announcement from Legal & General