Final salary scheme: what happens if company split itself up?

tggzzz

I once worked for the UK subsidary of a US company that is considering splitting itself into two companies.

I have a final salary pension (<£30k) that I could take now or could leave "invested" for the next few years.

If the company does split, what are it obligations particularly w.r.t. drawing the pension before normal retirement date?

• legally obliged to have unchanged conditions
• can choose to have unchaged conditions
• can choose to do whatever it wants
• can inadvertently screw its employees and ex-employees (that't not too hypothetical, unfortunately)

So, how do I determine whether to start drawing the pension sooner or later? Who would be a good person to ask?



N.B. I'm not interested in the standard "earlier => reduced" tradefoffs, since they are (currently) well defined.

mania112

Pensions are held in trust.

This means the fund is not under possession of the firm.

If anything happens to the firm, the pension remains in tact and will not be affected.

The only issues start when the fund isn't large enough to pay pensioners, at this time there is protection of up to 90% of the pension you were due.

tggzzz

Thank you for your answer.

There is the usual "company may at its discretion allow a pension to be taken before the normal retirement date" clause. In respect of that if the company splits:

• Would all the "terms and conditions" of the pension remain unchanged, or might they be varied?
• If the pension is "sold" to a third party company, what would be their obligations?

Background: it is not unknown for companies to "change" in order to reduce their pension liabilities or, as might be relevant in this case, to take the opportunity of change to reduce their liabilities. I'm a pessismist until proven otherwise, which has stood me in good stead in the past!

Linton

I would not expect any change to affect accrued benefits which are protected against scheme failure as mania says. However an employer can change the Ts & Cs for future contributions at any time, so I dont see anything special about the company split.

tggzzz

Linton wrote: »

so I dont see anything special about the company split.

Neither did I the last time the company split...
... unfortunately I (and many other employees) were handed a large CGT bill, even though we hadn't made a capital gain. Income tax inspectors couldn't believe it, but it happened. One of my colleagues was presented with a bill for >£50,000!