Unexpected consequences for your charity pension scheme after a merger

Governance | David Davison | 4 Mar 2010

I noticed the positive announcement this morning that Signature and Care Support is to merge with Choice Support and it has created more jobs.

This is clearly good news but from a pensions perspective the change does highlight a major issue for any bodies changing status (e.g. incorporating or merging) where they participate in multi-employer pension schemes such a those run by local government, the Pensions Trust or similar.

Such a change in status can trigger the unwelcome pension consequence of terminating the participation of one (or both) bodies in the scheme with the requirement to pay a very significant debt contribution to the scheme.

The level of debt can be many times the size of that disclosed in the organisations accounts and can frequently impact on the organisations future success. It could also be levied even where there is no change to the numbers of staff continuing to participate in any scheme post the change.

This is an area where great care is required and early engagement with the pension scheme is essential as problems can frequently be overcome but only if arrangements are made in advance of any change. I’m not suggesting that this is the case here as I’m unaware of the pension background but it is a general note of warning to be prepared where any change in corporate status is contemplated.

Directory: Pensions Trust

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