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Employer debt and approved withdrawal arrangements
The challenge for employers and trustees
When an employer ceases to participate in a multi-employer defined benefit pension scheme which is in deficit, it is liable to pay a debt to the trustees of the scheme equal to its share of the deficit calculated on a buy-out basis. Such 'exit' debts can be triggered by the sale of a group company or by internal group reorganisations and they can run to several million pounds. Therefore, it is vital that companies take legal advice at the earliest opportunity.
Trustees can be faced with a delicate balancing exercise between demanding payment of an exit debt immediately and agreeing to an alternative arrangement that may be of more benefit to the group’s business.
How we can help
We have a great deal of experience in advising employers and trustees on the circumstances in which an exit debt is payable and on the options for dealing with exit debts, including:
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withdrawal arrangements
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approved withdrawal arrangements, and
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apportioning the debt to another group company.
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