Pension Case Studies

Problem

Company X, based in Glasgow had been approached by an overseas conglomerate interested in purchasing it. Acquisition talks had progressed to an advanced stage when it became apparent that the professional advisers involved at that point were not qualified to give advice on the position of the company's staff pension scheme, nor the Directors pension arrangements - both of which were being sponsored by Company X. The staff arrangement was a Group Personal Pension and the Directors were all members of a Small Self Administered Scheme (SSAS). The Directors of Company X were keen to protect the benefits for their staff and to disengage their own scheme from the company after acquisition, while the potential purchaser was anxious to reassure itself of the solvency of the schemes and to establish the financial obligations that maintaining them would place on it as new employer. The accountants brokering the deal approached us for help and advice.

Solution

It is not unusual for the issue of pensions to be left until a late stage in any deal, and as with this situation the resolution of the pension issue can have a huge impact on the success or failure of the deal. Our first task in this deal was to undertake due diligence exercises in respect of both pension schemes and produce reports for our client. We were able to show that both schemes were funded appropriately and could meet their responsibilities.

The Staff Pension Scheme
Members of the existing staff were to be offered the opportunity to join the pension scheme run by the overseas conglomerate; however the conglomerate was not prepared to take on the old scheme and we were asked to give advice on how best to protect the benefits for existing members. We were able to advise individual members on the benefits to them of joining the new scheme and to arrange for their existing benefits to be deferred until arrangements could be made for them to be transferred if required.

The Directors SSAS
The Directors SSAS presented different issues. Following completion of the due diligence exercise we were able to confirm that the scheme was fully funded and without liability. Furthermore, by altering the Trust Deed and Rules of the scheme we were able to limit the purchaser's liability to a sponsoring role whereby they were merely responsible for the costs of running the scheme and maintaining contributions to it. All other responsibilities and fiduciary duties were transferred to the Managing Trustees (members) of the scheme, thus allowing both parties to achieve an agreed settlement.

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