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ARTICLE · 26 JANUARY 2005

The Pensions Trap: Issues for Private Equity Investors

Jones Day
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Pensions are increasingly a major focus in the acquiring and running of businesses. This article alerts private equity investors to the implications of incoming pensions legislation and acts as a reminder of pensions related issues generally.

United KingdomStrategy
Adam Greaves
Adam Greaves
Rosalind Connor
Rosalind Connor
James Goold
James Goold
John Papadakis
John Papadakis
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Pensions are increasingly a major focus in the acquiring and running of businesses. This articlealerts private equity investors to the implications of incoming pensions legislation and acts as a reminder of pensions related issues generally.

Key points

  • Private equity investors and their management companies could be liable to contribute to final salary pension scheme shortfalls.
    • MBOs and other acquisitions made by business transfers no longer wholly escape obligations to provide the pension entitlements of transferring staff.
    • New funding rules are to apply to final salary pension schemes which will require greater contribution levels by investee companies.

    The Pensions Act

    The Pension Act 2004 (the "Pensions Act") received Royal Assent on 19 November 2004 and is expected to come into force from April 2005. Some of the features of most importance to the private equity industry are discussed below.

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