Ask the Expert: Staff pensions and deals
John Sansone, director of Berkeley Burke & Company, offers guidance to entrepreneurs on incoming auto-enrolment pensions legislation.
All answers are for general guidance only. Each case must be handled on the individual facts.
Q: Will the new Auto-Enrolment pensions legislation being introduced from October 2012 affect corporate transactions?
This new piece of legislation will affect all employers in the UK with one or more employees and is a fundamental shift in the approach to providing staff pensions and the duties and responsibilities of employers. In addition to the potential substantial increase in business costs resulting from increased employer pension contributions, there will be a range of new administrative and process requirements which will impact HR, payroll and related systems and records, employee contractual arrangements and communications.
It is probably fair to say that in the past consideration during the due diligence process of the potential costs, risks and opportunities in the area of staff pensions and other employee benefits has typically been left until late in a deal. This situation has improved in recent years, largely as a result of the well publicised issue of how the substantial costs in final salary pension schemes can hinder and in some cases stop a deal in its tracks.
On speaking to corporate finance professionals recently, we have started to see another phenomenon raising its head, and that is the forthcoming Pensions Auto-Enrolment legislation which becomes effective in general from October 2012. Deals that were currently under negotiation have hit a ‘show-stopper’ when it was suddenly realised at the last minute that of the current workforce being acquired by a purchaser only a small proportion of the employees currently participate in the existing staff pension scheme. Having done the analysis it became clear that the potential size of future increased business costs in the area of staff pensions and the associated new administrative bureaucracy meant that the economic viability of the proposed deal was seriously undermined.
Berkeley Burke Employee Benefit Consultants is committed to working with deal principals and their respective advisers to help to identify the future potential cost and risk exposures resulting from this new landmark pensions legislation and to exploring strategies that can be adopted to manage these elements of future business plans and cash flow forecasts.
Contact details
John Sansone
Berkeley Burke & Company
0116 204 2923
sansone.j@berkeleyburke.com
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