Worldwide: US Acquisitions In The UK – How To Manage UK Pension Risks

Last Updated: 25 October 2016
Article by Clive Weber and Justin McGilloway

US owners or would be owners of UK companies should take extra care in the case of a UK defined benefit pension scheme ("DB Scheme"), sometimes known as a 'final salary' scheme, in the UK group. This note provides suggestions as to how US acquirers/owners ("US Acquirer") should seek to manage the pension risk of UK DB Schemes.

General picture

Deficits in UK pension schemes have increased dramatically in recent years for a variety of reasons. Increased longevity, poor investment returns and particularly the steep decline in UK gilt yields (greatly increasing pension liabilities) have all contributed to this. Under UK law the sponsoring employer is liable for the scheme's deficit. In some cases this has resulted in a severe strain on the employer's business and/or its total collapse. In this event scheme members will usually be entitled to receive compensation from the UK's Pension Protection Fund but the compensation is often at levels considerably less than the scheme benefits.

The Halcrow pension scheme case

The case of the Halcrow pension scheme is an example of UK pension problems emerging for the US Acquirer after acquisition.

In 2011 a USA global engineering company, based in Denver, Colorado ("Halcrow USA") acquired the UK Halcrow engineering group ("Halcrow UK"). The only employer with direct legal responsibility for the UK Halcrow Pension Scheme under the scheme's trust deed was Halcrow UK. Halcrow USA took care not to assume direct responsibility for the scheme.

Winding the clock forward five years, the picture is very different. In July 2016 Halcrow USA and Halcrow UK reached a settlement with the UK Pensions Regulator ("TPR") and the UK's Pension Protection Fund. Under the settlement Halcrow USA contributed an additional £80 million to the pension scheme and provided a £50 million guarantee.

The alternative was for Halcrow USA to withdraw its support for Halcrow UK. Because of the large deficit in the Halcrow pension scheme this would have led to Halcrow UK's insolvency and the loss of its substantial UK business as well as job losses.

Learning points from Halcrow

Key points for a US Acquirer are to ensure it obtains specialist pension legal advice on the UK pension scheme including in the following areas:

  • the extent to which changes to the scheme can be made under the scheme's trust deed;
  • the powers of the scheme trustees under the pension scheme's trust deed to obtain employer
  • contributions; and
  • TPR's powers to obtain extra funds and/or guarantees from group companies other than the
  • direct legal sponsors of the pension scheme.

TPR's powers

TPR's powers are not comparable to the position in the US under the US Multi-employer Pension Plan legislation. Under this we understand that in certain circumstances a group company not sponsoring a scheme may find itself automatically liable for the pension scheme deficit of a scheme sponsored by a company elsewhere in the group. On 28 March 2016, in Sun Capital Partners v New England Teamsters Pension Fund heard in the Massachusetts District Court (Action No. 10-10921-DPW), two Private Equity Funds were even held liable for the scheme deficit of another company which together the Private Equity Funds controlled.

In contrast, in the UK there are many conditions for TPR to satisfy before it can impose liabilityon a group company other than the company sponsoring a scheme.

However TPR considers there is no geographic limit to its powers. In TPR's opinion any order it makes is as enforceable in Birmingham England as in Birmingham Alabama.

On the face of it, this is an unlikely legal proposition. Except in a narrow class of cases, the orders of a public body in one country are not automatically enforceable in another country, particularly where there is no mutual "enforcement" Treaty in force between the two countries. Nonetheless, TPR maintains these views but they have yet to be fully tested.

Further potential developments of UK Pension authorities' regulatory powers

Following the recent UK Parliamentary Committee enquiry into the British Home Stores Pension Scheme, there are calls (including from TPR) for TPR to be given power to intervene at the time of a corporate acquisition. For instance, it is suggested that in larger acquisitions, it should be compulsory for the parties to apply for Clearance. At present 'Clearance' applications by the seller are voluntary and in practice are seldom made. If given, Clearance means that subject to the parties meeting any Clearance conditions TPR will not seek extra contributions or other support in relation to the transaction in question.

An extension of TPR's powers is unlikely but US Acquirers will need to stay alert to developments in this area.

UK Takeover Code

Where the UK target's securities are admitted to trading on a regulated market or multilateral trading facility in the UK or in the Channel Islands or Isle of Man or it is a plc or in certain circumstances a private company, any acquirer needs to comply with the City Code on Takeovers ("Takeover Code"), including the Takeover Code's pension requirements where the target company's pension arrangements include a DB Scheme. In which case:

  • bidders must disclose their intentions in relation to the target's DB Scheme, in particular, they must comment on: future employer contributions (including the scheme funding arrangements); the accrual of benefits for existing scheme members; and the admission of new members to the pension scheme; and
  • target's DB Scheme trustees are entitled to receive the same documents that the bidder and target have to make available to target's employee representatives. This includes: the announcement confirming the offer period; the announcement of a firm intention to make an offer; the offer document; and any target's board circular in response to the offer document. In addition to this, trustees of the DB Scheme can if they choose have their views published on the impact of the bid on the pension scheme.

Potentially the Parliamentary Committee enquiry mentioned in 5.3 above may recommend similar provisions on takeovers of large UK private companies (not presently subject to the Takeover Code) with DB schemes. This would no doubt create a greater burden on the seller and the acquirer and such a proposal is likely to be strongly resisted by businesses.


In our view a US Acquirer (or existing owner) of a UK company with a DB Scheme needs to proceed carefully. It is no good assuming the US company is necessarily immune from the pension problems of the UK pension scheme just because the US company does not participate in the scheme.

The acquirer should ensure prior to the transaction that it fully understands the pension risks. This can be achieved by the acquirer obtaining comprehensive professional advice including legal advice.

We have considerable experience of UK schemes with non-UK ultimate owners.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.