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Corporate activity- general - Coggle Diagram
Corporate activity- general
Changes in sponsoring employers
Impact on sponsor covenant
Funding approach and investment strategy
Trustees likely to review funding approach and investment strategy
Scheme merger
Achieve greater efficiency
Likely that the merger will involve a bulk transfer of all the assets and liabilities of one more schemes into another.
Issues to consider:
the requirements of the trust deed and rules of the schemes
the implications of a bulk transfer without members' consent
the funding levels of the schemes
which scheme to use as the receiving scheme
the benefits to be provided in respect of past service
future service benefits
Change of ownership of a whole business
When a company acquires the whole of another business, it may require responsibility for one or more pension schemes.
Trustees likely to review funding approach and investment strategy
Covenant review should consider the market strength of the overall business
which may improve as likely that newly acquired business was financially attractive
effect of any change to the financing of the business (which may be negative e.g. involve a greater reliance on debt to finance the acquisition.
Benefits built up by employees of the purchased business both prior to and after the acquisition are not directly impacted by the acquisition itself.
However, after the acquisition there may be a review of employee benefits.
Change of ownership of part of a business
The parties to the transaction need to decide whether the Purchaser or the Vendor will take responsibility for benefits built up in the Vendor's benefit arrangement.
Several different parties, often with differing objectives, will have an interest in the deal and any payment of a bulk transfer value between the Vendor's and Purchaser's schemes.
The Sale and Purchase Agreement is the legal document which covers the transaction agreement between the Vendor and Purchaser. Pensions will usually form a distinct section of the Agreement. An Actuary's letter will set out how any bulk transfer value will be calculated.
Considerations for the Vendor's trustees in determining the amount of bulk transfer value
Funding and solvency level of the Vendor's scheme before and after the transfer (and hence security for the remaining members)
Whether the transaction would have a material impact on priority orders under the Vendor's scheme in the event of a winding up before any deficit is recovered.
Any preservation and other legal requirements case of a transfer without consent
The requirements of the Agreement
Practical issues before bulk transfer can take place
the establishment of a new pension scheme by the Purchaser if one does not already exist or if the existing scheme is not felt to be suitable
the transferring employees will need to be informed of their choices and if appropriate asked to consent to the transfer.