Pensions - Articles - Pensions increasingly a priority in acquisition activity


Scrutiny on company pension schemes is increasingly impacting possible acquisition activity in the UK. Recently, both a US private equity firm’s plan to buy rail operator FirstGroup and Melrose’s plans to takeover GKN have been impacted by their ability to fund pension liabilities.

 FirstGroup runs the South Western Railway and Great Western Railway franchises, was identified last year as the company most under pressure from its pension schemes relative to its size because of its more than £4bn of pension liabilities against its £1.2bn market capitalisation.

 Ian Browne, pensions expert at Old Mutual Wealth comments: Ian Browne“High profile pension scheme debacles have led to a public outcry for definitive action to stop pensions being hung out to dry by unscrupulous employers. It seems The Pensions Regulator and government have heeded this call and are asserting their authority to ensure that pension schemes remain a priority to all businesses. This focus has already started to impact business moves with the fate of acquisitions increasingly tied to how they intend to handle the pension scheme liabilities. It is crucial such a crackdown continues as the fate of thousands of people’s prosperity in retirement rests on such actions.

 “Last month, the government issued its long-awaited white paper on Defined Benefit Schemes, where it took a tough line with employers and its recommendations were squarely in favour of pension scheme members. This placed The Pensions Regulator (TPR) firmly at the heart of its solutions, with the ‘regulator’ referred to 357 times in the 76 page report.

 “TPR is set to be gifted with new powers to take a tougher and more proactive role, including giving fines and punishing reckless executive behaviour around pension schemes as a criminal offense. This tough stance will focus executives minds and make them think twice before making irresponsible decisions.”

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