Early Retirement Benefits On Business Transfers

1. SUMMARY

On business transfers there is a risk that where the seller provides a company sponsored "occupational" pension scheme which allows benefits to be paid before members reach their normal retirement date, the obligation to provide those benefits will become an obligation of the buyer. The buyer’s obligation would apply to benefits calculated by reference to the period before the transfer as well as to the period after the transfer. It is arguable that this obligation transfers only in certain cases, for example where the employees have at some point been members of public sector schemes. However, these arguments cannot be relied on. Buyers should be advised to take account of the potential obligation to provide the benefits when valuing the business or to seek some form of protection, such as an indemnity from the seller.