10 February 2012

Caught in the middle between parent company and pension trustees?

This question was posed at a Wales and West regional pension workshop aimed specifically at businesses with overseas parents.  After a lively discussion, some common themes emerged:

  • Group management are generally most interested in the size of the pension deficit and its impact on the group balance sheet, although cash spend on  pensions and the pension expense in the income statement are also important.
  • Size matters - UK management have more autonomy where the pension scheme is small relative to the group - but this can be a double-edged sword if the pension trustees have concerns about the ability of the UK business to support the scheme.
  • Parents do not generally understand the powers of the Pensions Regulator and can get a nasty surprise during corporate transactions.
  • Trustees are uncertain as to how to assess the employer covenant and whether formal support from the parent is needed - managing the levy payable to the PPF was often the driver for seeking a parent company guarantee.
  • Often, the parent company does not want to be directly liable for the pension deficit

Dealing with these challenges is not easy, but there are some important steps that UK management can take to make their life easier.

  1. Clarify roles - who is representing the company in negotiations with trustees?
  2. Establish communication channels - have you got access to the right person at head office?
  3. Agree objectives - establish a joint plan with the trustees for the future of the pension scheme.
  4. Be proactive - UK management should take the lead in developing the pension strategy - this is usually the best way to ensure all stakeholders’ objectives are met.
  5. Take advice - UK management need specific advice, independent from the trustees, to demonstrate to group that the issue is being effectively managed.

Contact details
Email: Alan Maccleaster
Tel: 0117 928 1158

Email: Stephen Hall
Tel: 0117 928 1197

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