Pensions Advisory

FRP guides pension trustees on restructuring proposals

Pension Advisory team leads review of employer covenant

Background

The trustees of a pension scheme, supported by a significant UK Employer, needed to complete a valuation of the scheme and required help to assess the employer covenant and understand the level of affordability of contributions to fund the scheme in the future. The Employer, a market-leading technology company, is a UK subsidiary of a large multi-national group based in Japan, and significant dividends had been paid from the UK to the rest of the group. The trustees engaged FRP to provide support and guidance on the scheme valuation.

Action

As employer covenant adviser to the trustees, FRP’s Pensions Advisory team undertook a detailed review of the Employer’s financial position and restructuring proposals. The team were able to identify that the Employer’s financial position had weakened significantly, largely as a result of dividends paid.

Outcome

Our Pensions Advisory team sought to understand the reasons for the dividends, and it was evident that poor worldwide financial performance, coupled with significant levels of debt in the wider group, had resulted in pressure being exerted on the Employer to make the dividend payments. After extensive negotiations, a more appropriate UK dividend policy was agreed and documented, together with an increased level of contributions to the pension scheme.

FRP identified that an equitable employer dividend policy was essential for the scheme Gerald Smith Pensions Advisory

Related team

Gerald Smith

Gerald Smith

  • Partner
  • Pensions Advisory
  • Birmingham