Businesses are facing additional risks when they withdraw from multi-employer pension schemes after April.
Companies ceasing to participate in final salary multiemployer pension schemes could face potentially greater liabilities when new regulations come into force unless they properly manage the risks involved, warns Hammonds' Birmingham-based pensions lawyer Matthew Giles.
"The new regulations could raise extra risk management issues in business disposals and group re-organisations," said Mr Giles.
"Many groups of companies operate multi-employer pension schemes in order to achieve economies of scale.
"The law is changing for schemes which include final salary benefits - pensions which are based on an employee's pay at retirement.
"When one of the companies participating in a scheme like this withdraws - for example on a disposal or group reorganisation - it is responsible for paying its share of any shortfall in the scheme.
"Currently, this is calculated according to legislation which sets out the Minimum Funding Requirement (MFR).
"But in the spring, regulations will be introduced which will mean that where a company ceases to participate in such a scheme after, the share of the shortfall will be calculated on a buyout basis - effectively reflecting what an insurance company would have to be paid to take on the pension liabilities. This will result in a much larger shortfall figure.
"Inevitably, this higher figure will be factored into the costings of any disposal or restructuring exercise.
"The key to effective risk management will be adequate - and early - due diligence.
"In a disposal, both the buyer and the seller will need to do their sums early, so they know how much is involved. The issue of who picks up the tab is likely to be a closely negotiated one."
With prompt action, companies still have the opportunity to complete a reorganisation under the current regime, although time is limited before the new rules are expected to come into force on April 5.
However, Mr Giles sounds a note of caution. He said: "The new pensions regulator will have power to intervene if such an exercise is deemed as an attempt to avoid liability to the pension scheme.
"However, where there is a sound commercial basis for the restructuring, prior regulator clearance can be obtained, giving the company comfort to proceed. I would urge any companies considering their group structure to act quickly."
