Pension Liability Transfer / Buyout

Transfer, onboarding and professional
management of pension obligations.

Pension Liability Transfer (PLT)

Background

Most MNCs closed their DB-Schemes in favour of DC-schemes (in Germany usually hybrid-DC or German-style DC). The accrued pension obligations covering pensioners or vested leavers may be transferred (spin-off or hive-down) to a SPV (Rentnergesellschaft) assuming the obligation. This transaction is called pension buyout or Pension Liability Transfer. The SPV is then transferred to Funding Solutions as the consolidation and run-off platform.

Advantages of a Pension Liability Transfer (PLT)

Tried-and-tested transaction

1

Release from legal liability

Pension liabilities are transferred to a pensioner firm which assumes the obligations in full. Provided proper handling, only a contingent liability remains for the obligations due and payable in the first 10 years (§ 133 UmwG). This risk can be mitigated, for example, by CDI-Investing or a bank guarantee. 

2

Transfer of
economic risks

All risks, such as investment risk, inflation and longevity are addressed as part of the transfer. No further obligations / no additional payments

3

Balance sheet relief

A (partial) settlement and immunization of the balance sheet according to German-GAAP, IFRS or US-GAAP can be reached. All P&L and balance sheet effects can be neutralized / immunized.

4

Administrative simplification

Full outsourcing of administrative work, while existing partners or mandate specific in-house solutions may be included.

5

Securing scheme members

Funded protection of the company´s pension obligations and additional protection by an external CTA-Trust. Priority coverage of obligations not uncovered by PSVaG.

Pension Liabilities

The pension commitments to pensioners and vested leavers are transferred to the pensioner companies ( § 123 para. 2, or para. 3 UmwG).

Pension run-off SPV / Pensioner firm

The pensioner company will be acquired by Funding Solutions as part of a share deal. The assets will be transferred to the external CTA-Trust.

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