Leyland Daf Pension Scheme

13th January 2009

In January 2009, the Trustee of the Leyland DAF Pension Scheme, Aon Trust Corporation, accepted a proposal to insure its benefits with Pension Insurance Corporation (PIC). In return for insuring the liabilities of the fund, PIC received assets amounting to approximately £226 million. The fund had approximately 5,000 members.

The Trustee accepted the proposal from PIC on the basis of its capabilities, competitive pricing and transactional flexibility. As a part of the winding up process, the Trustee assessed the level of assets and how they could be used to provide additional benefits to members.

The fund was closed to new members in 1994, the sponsoring company went into liquidation in July 1996 and the fund has in recent years secured substantial benefits with the state pension fund and commenced winding-up. The Trustee concluded that pension buyout offered the best way of de-risking the fund given market conditions and for the long term.

Transaction highlights:

Value and certainty:

• The Trustee valued the competitive pricing and transactional flexibility
• Agreed approach to allow for market volatility
• The situation required detailed work and analysis to understand and address a complex situation

Value-creation:

• Rebalancing of members' benefits

Focus on the pension fund members:

• Aon concluded that, "[Pension Insurance Corporation provided] the best level of security for the members' benefits..."
• The Trustee concluded that this transaction provided the best option to de-risk the schemegiven the current market conditions

"I believe that Pension Insurance Corporation offers the best opportunity for us to derisk the pension scheme"

Oliver Rowland, a Director of Aon Trust Corporation (Trustee)

"This has not been a straightforward deal, given the complexities surrounding the entitlements in the scheme. We have been very impressed with PIC's positive and helpful approach to finding the best solution for the scheme members. We strongly believe that the [pension insurance] buyout market offers an opportunity for companies to manage their pensions risk. Timing and market volatility play an important role, but we are confident that further tailored insurance deals will develop in 2009."

Dominic Grimley, responsible for managing bulk annuity broking at Hewitt Associates (Adviser to Trustees)