Janet Brown considers how to make sure a scheme merger runs smoothly
A desire to cut costs and harmonise pension provision often drives companies with multiple defined benefit pension funds to consolidate their schemes, but experts say there are a number of factors trustees and employers should bear in mind to ensure a smooth merger.
While consolidation has been a hot topic in recent months, these discussions tend to be in relation to the Pensions and Lifetime Savings Association’s idea of superfunds, or enabling numerous smaller isolated schemes to merge as discussed in the government’s DB white paper.
However, many acquisitive companies have more than one pension fund, having bought various businesses over time. This means they may have the option of a group merger.
Janet Brown, partner at law firm Sackers, highlighted the importance of funding parity.
“If you’re acting for the receiving trustees, you’re going to be very concerned if you’ve got a better funding position and it’s going to be diluted by another scheme coming in,” she said.
Brown added that different isolated benefits sections can be created within a scheme to remove some of these funding issues, because each section can have different funding levels.
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