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A B C D E F G H I J K L M N O P R S T V W Y

Scheme mergers, closure and winding up

Scheme mergers, closure and winding up

Many sponsors of pension schemes, and trustee bodies, are looking for ways to control the cost of their pension arrangement, particularly if they are responsible for a more traditional defined benefit (final salary-type) scheme,

Sometimes it is possible to achieve economies of scale by merging two or more pensions together.  This is also an option if two companies merge and both have this kind of pension scheme.

Employers may feel they have no option but t to close the scheme to future accrual, so that new benefits are no longer built up within it.  Whilst the benefits already earned within the scheme still have to be funded (including any deficit which exists), it does at least cap the potential costs because no new pensions liabilities are continuing to accrue.

If a scheme is well-funded, then it may be possible to wind it up completely.  This means securing all promised benefits outside the scheme by using the scheme’s funds to buy annuities or other appropriate financial products.  Once this is done and the scheme has no more assets and liabilities, the scheme will cease to exist.  This ensures that once and for all the sponsor will have no more obligations towards the scheme.

Reducing or eliminating a sponsor’s obligations to a pension scheme can be an extremely complex process.  We have wide experience in advising on all of these issues, and can work with other advisors, including in particular the scheme’s actuary and accountants to ensure that the process runs smoothly throughout, and provides the desired end result.

Useful Downloads

Pensions Leaflet