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Pension threat to UK M&A

UK corporates that don't complete acquisitions before April 5 2005 could face increased pension costs under new TUPE regulations, according to a warning from law firm Withers LLP.

The Transfer of Undertakings (Protection of Employment) Regulations 1981 (TUPE) safeguard employees' rights where businesses change hands between employers.

From April 5, employees who are active members of an occupational pension scheme will be entitled to pension benefits from their new employer. Currently, rights to pension schemes do not transfer following an acquisition under TUPE and the new employer does not have to provide replacement benefits.

Meriel Schindler, head of employment at Withers, says: "Those who are purchasing businesses and wish to avoid the new regime would be well advised to ensure that their transactions are completed before 5 April 2005. Those who engage in such transactions after 5 April 2005 will need to include in their price calculations this new obligation to provide pensions." The only exception is a defined contribution (or money purchase scheme) where the protection only applies if the employer matches employee contributions.

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