Pensions and company takeovers
- Thread starter Witz
- Start date
I would be pretty sure that your pension is safe and roped off from the company finances. Even when the trusteeship of the pension scheme is in the hands of the company or its officers they generally cannot access the funds themselves and while they have some say over matters the money ultimately belongs to the individual members. However you should make sure that this is the case by asking the relevant parties - e.g. company, trustees, pension consultants, Pensions Board etc.
Brendan Burgess
Founder
- Messages
- 52,200
Hi Witz
This is my understanding:
I am assuming that you are in a defined benefit scheme. This means that the company has a legal contract with you to give you say 2/3rds of your salary on retirement. The acquiring company also has that obligation.
The company has set up a legally separate fund which they can't legally raid as such.
When A Ltd acquires B Ltd, the state of the pension scheme is very important. They inherit the liabilities of the pension scheme. If it is underfunded, then they pay less for B Ltc. If there is surplus funding, the acquiring company may stop paying into the pension fund until the surplus is used up.
Your new employers might try to make your pension scheme less generous e.g. they might try to convert it into a defined contribution scheme. The practice in Ireland has been that the defined benefit scheme is retained for existing employees and new employees get a less generous scheme.
The main risk you face is that your new employer doesn't fund the scheme adequately. It runs into business problems and the scheme is underfunded and the company goes to the wall. It really depends on the financial strength of the acquiring company.
Some examples in Ireland:
NET the State owned fertilizer company went to the wall and the pension scheme was massively underfunded. The employees lost out badly.
AIB's pension scheme is underfunded, but as AIB is doing very well, this is not a problem for the employees.
Waterford Wedgewood's pension scheme is underfunded and the company is not profitable. The employees and pensioners are at risk.
Brendan
This is my understanding:
I am assuming that you are in a defined benefit scheme. This means that the company has a legal contract with you to give you say 2/3rds of your salary on retirement. The acquiring company also has that obligation.
The company has set up a legally separate fund which they can't legally raid as such.
When A Ltd acquires B Ltd, the state of the pension scheme is very important. They inherit the liabilities of the pension scheme. If it is underfunded, then they pay less for B Ltc. If there is surplus funding, the acquiring company may stop paying into the pension fund until the surplus is used up.
Your new employers might try to make your pension scheme less generous e.g. they might try to convert it into a defined contribution scheme. The practice in Ireland has been that the defined benefit scheme is retained for existing employees and new employees get a less generous scheme.
The main risk you face is that your new employer doesn't fund the scheme adequately. It runs into business problems and the scheme is underfunded and the company goes to the wall. It really depends on the financial strength of the acquiring company.
Some examples in Ireland:
NET the State owned fertilizer company went to the wall and the pension scheme was massively underfunded. The employees lost out badly.
AIB's pension scheme is underfunded, but as AIB is doing very well, this is not a problem for the employees.
Waterford Wedgewood's pension scheme is underfunded and the company is not profitable. The employees and pensioners are at risk.
Brendan