This document discusses financing solutions from Leveraged & Equity Investment Partners for defined benefit pension risk transfer. It notes they can provide immediate partial or full risk removal without settlement costs. Tables show how their financing solutions provide faster risk removal at a lower net present cost than traditional approaches like insurer loans or deferred premiums. Contact details are provided for Chris Bardouleau to discuss potential pension financing schemes in more detail.

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DEFINED BENEFIT
RISK TRANSFER
FINANCING PROGRAMMES
Achieve immediate partial, or full, risk
removal.
Remove today’s risk with tomorrow’s
cashflow, without settlement cost.

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INTENDED ONLY FOR THE RECIPIENTS AUTHORISED TO RECEIVE IT. DISCLOSURE, COPYING
OR DISTRIBUTION IS PROHIBITED AND MAY BE UNLAWFUL, UNLESS THE WRITTEN PERMISSION
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How are you addressing your share of the £2 trillion
pension risk?
Considered full risk transfer but lack scheme assets, or
maybe hold investments that insurers do not want?
Worried a partial risk transfer would put too much strain
on the uninsured balance?
Do you think the only financing options are just an insurer
loan or deferred premiums?
Leveraged and Equity Investment provide unique
financing solutions that provide immediate risk
removal.
Solutions that turn on balance sheet capital risk to off
balance insured revenue expense.
Solutions that give risk removal today, using tomorrow’s
profits.
Solutions that minimise sponsor cashflow cost, whilst
maximising capital for reinvestment.
Solutions that cure, not treat.

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INTENDED ONLY FOR THE RECIPIENTS AUTHORISED TO RECEIVE IT. DISCLOSURE, COPYING
OR DISTRIBUTION IS PROHIBITED AND MAY BE UNLAWFUL, UNLESS THE WRITTEN PERMISSION
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Immediate or targetedBuy-In or Buy-Out.
 Leveraged & Equity Investment buy-out financing solutions
provide an immediate route to scheme buy-in or buy-out.
 Alternatively, our financing can provide a route to future risk
transfer, with an identified target buy-in or buy-out date.
There are two primary objectives.
 Firstly, to provide a fully funded immediate buy-in or buy-out
solution with payment terms up of to 25 years.
 Alternatively, to provide finance for full funding on an accounting
basis, with a target date for a buy-in or full buy-out.
Basic Solution.
Leveraged & Equity Investments work closely with the majority of
professional advisers and consultants to defined benefit pension schemes.
We provide financing for most bulk annuity insurers and leading
investment management companies products and strategies. Your
advisers can assist you in establishing an initial approach to Leveraged &
Equity Investments to assess the suitability, and availability, of risk
transfer financing.
The numerical outline of our basic solution follows, it gives eligible
sponsors an immediate bulk investment into their defined benefit scheme
to enable buy-in, or buy-out without settlement cost. Alternatively, a
targeted risk transfer solution allows for asset outperformance, and
forecast increases in yields to target a future risk transfer date.
The payments are a revenue expense, so neither Capex nor debt.
Alternatives include Scottish Limited Partnerships or other Special
Purpose Vehicles.

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Buy-in financing comparison.
The table shows the funding position, and cost based upon the NPV where the deficit equates to 100%. The table indicates the cost from the
existing position to achieve full accounting basis funding, a partial buy-in and target uninsured accounting funding fifteen years hence, the
L&EI cost of partial buy-in, immediate full uninsured accounting funding and 108% by year fifteen. The scheme is insuring those in pension
only.
Agreement term (yrs.) Pre buy-in position.
Secured fifteen years
to fully recovered
accounting funding.
Post typical buy-in
position. Fifteen years
to target uninsured
accounting funding.
Fifteen-year L&EI solution.
Immediate full funding,
target funding ratio
achieved by year fifteen.
Current scheme liabilities 1000 1000 1000
Current scheme assets 900 397 403
Insurance assets 600 600
Surplus/Deficit 100 103 Zero
Funding ratios (Years 1 +
15)
90% - 100% 89.7% - 108% 100% - 108%
Uninsured liabilities 1000 400 400
Sponsor total post tax
NPV cashflow cost of
original deficit.
22.25% 51% 3.75%

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Buy-out financing comparison.
The table below shows the funding position and cost based upon the NPV the total current scheme liabilities equate to 100%. The table
indicates the cost of the existing position being funded over fifteen and twenty five years to the required buy-out funding level. The L&EI
solution provides immediate, without scheme recourse, full buy-out.
Agreement term (yrs.) Fifteen years to buy-
out accounting
funding level of
135%.
Twenty five years to
buy-out accounting
funding level of
135%.
L&EI full buy-out solution,
with immediate buy-out
completion.
Current scheme liabilities 1000 1000 Zero
Current scheme assets 900 900 Zero
Surplus/Deficit 100 100 Zero
Funding ratio 90% 90% N/A
Scheme uninsured
liabilities (%)
100% 100% Zero
Years to risk removal 15 25 Zero
Sponsor total post tax
NPV cashflow cost of total
liabilities.
23% 16.5% 9.75%

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OR DISTRIBUTION IS PROHIBITED AND MAY BE UNLAWFUL, UNLESS THE WRITTEN PERMISSION
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Tax benefits.
This document deliberately avoids detailed tax comparisons, despite the
Leveraged & equity Investment solutions offering a number of tax
advantages.
The Leveraged & Equity Investment solutions provide an immediate tax
charge as a pension payment for the bulk scheme payment.
Typical financing costs associated with these payments would allow for
the interest element to be deducted from taxable profits, but not the
capital. The L&EI solution, due to the revenue accounting basis, means the
whole “financing” payment is tax deductible over the term.
Covenant and scheme riskremoval.
All solutions, whatever format, are free of recourse to the pension
schemes, by completing immediate buy out all scheme risk is removed. By
completing immediate buy out all pension risk is instantly removed from
the employer balance sheet.
PensionProtectionFund levy.
The immediate clearance of the deficit would substantially reduce, or
eliminate, PPF levy payments. Levy payments are bespoke calculations.
The average rate applied to “big schemes” with a 96% typical funding
ratio is 0.03% of assets. Following are summarised numerical
comparisons of typical approaches to buy-in and buy-out objectives and
the savings and faster risk removal that can be obtained by utilising the
financing structures provided by Leveraged & Equity Investment.

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OR DISTRIBUTION IS PROHIBITED AND MAY BE UNLAWFUL, UNLESS THE WRITTEN PERMISSION
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The theoretical scheme used the following data for calculation purposes.
 90% funded on an accounting basis.
 Liabilities are 60% in pension,40% active or deferred.
 The scheme is 55% gilt/bond, or another non-growth asset
invested.
 Buy-in pricing has been set at accounting deficit +50 basis points,
the insurer purchasing scheme gilt and bond assets, cash
settlement for the balance.
 The buy-out insurance premium is 35%.
 A reference funds cost rate of 4.3% (1) has been used for
illustrative purposes on the financing structures only. Sponsor
companies are assessed on an individual basis.
 A prudent net return rate is used. It is 2.5% below the average net
rate of return achieved by UK companies over the previous 18
years of 11.7%(2).
 The average discount rate used by FTSE 100 defined benefit
schemes in 2015 applies, 3.8%.
 The return on scheme assets equates to discount rate plus 100
basis points.
 Target uninsured funding ratio 108%.
 Recovery plan contributions equivalent to 8.25% of the deficit per
annum are made to clear the pre buy-in deficit over 15 years, the
scheme has security equivalent to 150% of the pre buy-in deficit.

8. THE INFORMATION INCLUDED IN THIS DOCUMENT MAY BE OF A CONFIDENTIAL NATURE AND IS
INTENDED ONLY FOR THE RECIPIENTS AUTHORISED TO RECEIVE IT. DISCLOSURE, COPYING
OR DISTRIBUTION IS PROHIBITED AND MAY BE UNLAWFUL, UNLESS THE WRITTEN PERMISSION
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Leveraged and Equity Investment funding solutions.
Leveraged and Equity Investments are financing specialists. Our financing
expertise is entirely devoted to three areas of financing and equity
investment, and only three areas.
Technology, Employee Benefits and bespoke project requests.
We have extensively researched the issues surrounding defined benefit
pension funding issues. Not before conducting this research, taking over
two years, have we produced our funding solutions.
Over thirty years experience of creating bespoke financing solutions has
enabled us to create a range of offerings that are cashflow, tax, profit and
pension scheme efficient.
The solutions we offer are individual, designed to maximise pension
scheme security at the lowest net present value to the sponsor.
Leveraged and Equity Investment process
The process is designed to minimise your time and cost, whilst enabling a
prompt deficit elimination solution.
1st Stage 2nd Stage 3rd Stage
Initial discussion to
establish the suitability
of L&EI financing, and
sponsor eligibility, for
solutions. No charge.
Confirm accounting,
legal, and regulatory
treatment.
Produce legal
documentation.
Agreement to proceed in
principle.
Establish additional
requirements.
In depth financial models
produced to agreed
terms (Tax, prompts,
creditors, security etc.).
Effects on existing
financial arrangements
inclusive.
Confirm closure dates.
Establish terms of
Trustee contact.
Analysis with sponsor’s
accounting and legal
advisers. Obtain Trustee
agreement.
Release funds to
appropriate parties.

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To arrange a preliminary discussion, contact your usual
scheme consultants who will investigate eligibility for financing
or Chris Bardouleau, Senior Partner at Leveraged & Equity
Investment who manages the pension financing schemes.
To contact Chris please use one of the methods below:
Email: chrisb@leaseinvestment.com
Direct Portable Number: +44 (0)870 3143 222
(1) Moody’s standard adjustment rates July 2016 for Baa3 4.3%.
(2) http://www.ons.gov.uk/economy/nationalaccounts/uksectoraccounts/bulletins/p
rofitabilityofukcompanies/octobertodecember2015. Average rate 11.7%. Rate
applied 9.2%