Case studies

Review of continuing sponsoring employer covenants

Large industry pension scheme: we are engaged by a large, multi-employer industry-wide pension scheme to assess the financial position of each of the participating employers. We advise the trustees on the ability of each employer to pay on going contributions, indicate the maximum contribution each employer could make and assess the assets available to the trustee in the event of insolvency of the employer.

We are also advising the trustees on how to split the scheme into legally distinct sections (sectionalisation) that maximise the security of members’ benefits without adversely affecting the employers’ businesses.

Listed multi-national company pension scheme:

when the principal employer decided to terminate contributions to the pension scheme the trustees turned to PKF for advice on assessing the employer’s proposed funding strategy and guidance as to whether it would be acceptable to the Pensions Regulator. As a result of our work the employer’s proposal was rejected and with our assistance the trustees are currently negotiating a better deal for the members.
Recent employer covenant reviews have included:

• a major charitable trust based in London
• The Milk Pension Fund – multi-employer scheme (12 sponsoring employers)

Review of the effect of a change in control or capital structure

Sale of principal employer:we advised the trustees of a multi-employer scheme on the impact of the sale of the principal employer. We prepared a financial model to assess the potential implications of the proposed transaction on the scheme in the event of insolvency of any of the participating employers and the impact on the security of both the transferring and remaining members’ benefits. We also drafted sections of the application for clearance to the Pensions Regulator and discussed both the impact on the Scheme of the new Regulations on approved withdrawal arrangements and the implementation of the PPF levy. Our advice to the trustees in negotiating with the sponsoring employer was crucial to reaching a satisfactory outcome.

Refinancing and payment of a large dividend: we advised a US parent company on the impact on their subsidiary’s pension scheme of a proposed refinancing package and payment of a dividend. We presented to the sponsoring employer’s bankers on behalf of the US parent company and discussed the implications of the proposal with the sponsoring employer. This resulted in an amended proposal that was satisfactory to all. Our employee benefits specialists also provided advice on changes to the scheme to reduce its future risk and cost.

Review of the effect of acquisitions and disposals

Business closure by overseas parent: we advised the overseas parent of the principal employer on the implications on their pension scheme of a proposed closure of, and redundancies at, a UK factory. Our wide ranging advice enabled the closure to be as pain free as possible.Acquisition of a competitor by a participating employer:when the participating employer, an AIM quoted company, made an offer to acquire a FTSE quoted competitor the trustees relied on our advice to protect the interests of members of the pension scheme. We analysed the transaction details and considered the reports of investment and due diligence advisers in order to assess the impact of the transaction on the employer’s covenant.

Recent acquisitions and disposals reviews have included:

• The Milk Pension Fund – major acquisition by the largest sponsoring employer
• Campbell Soups
• Project Oak
• a proposed demerger of a company’s education services division

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