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merger Q

I

inthebag

Member
The answer to this Q may well reveal how much studying I've still to do for the exam!!

If two schemes are being merged (both under the same employer) - why would the funding level be a main factor in deciding which scheme should transfer? e.g. if 'A' was 90% funded..'B' 110% (same basis as A) then surely whoever transfers assets/liabs across the resulting position will be 100% all else being equal - so A's fund position has improved..B's slightly diluted

what am I missing here?

:confused:
 
Well, I still have a lot to do myself (where did this Q come from?).

Would suspect that there are several issues there....

  • Trustees may not be the same trustees
  • Trustees are required to act in best interest of THEIR members
  • (enter the ownership of surplus issue - the scheme that's 110% funded might well want to hang onto that for augmentations)
  • does this trigger debt on employer (I don't know!) - if it does, the scheme with 90% funding will need immediate cash injection, whereas the 110% funded scheme might not or it might be less

few of my initial thoughts, anyway.
Not sure that actually helped!
 
Further points to consider:
- Co. might be using the funding levels of its schemes to its advantage (perhaps to help remove a surplus [avoiding tax/benefit increases] and simultaneously reduce/meet a deficit - obviously Trustees/members won't be too happy though!)
- Co. may be required to pay an additional contribution to bring the merged scheme's funding level in line with B if A is transferred into B, to maintain security of B's benefits
- size of schemes will have a bearing - obviously if one is bigger than the other then the funding level won't be the average of the two (although I suppose "size of scheme" is then the factor, not funding level)

Hope this gives you some further ideas.
 
I think my mindset when asking this was that the merger is going ahead regardless and whatever scheme transfers, the same F/L results.....but yes I agree with both your comments...clearly if two sets of independent trustees then they still need to carry out duties/protect security etc....penny has dropped!

I'm beginning to wonder if Acted will start charging for this forum.....

thanx :)
 
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