Succession planning for family businesses – Pensions

By Brabners LLP

04 May 2021

shutterstock_1536232289.jpg

A potential purchaser will want to understand the pension arrangements your business operates, and check that they have been properly managed.  Ensuring that your pension schemes are in order well in advance will help the sales process to go smoothly.  

Automatic enrolment

All businesses are now required to automatically enrol employees into a “qualifying pension scheme”. A potential purchaser will want to be sure that the automatic enrolment requirements have been complied with, so that there will be no risk of action by the Pensions Regulator (“tPR”).

We recommend ensuring that full records are available to potential purchasers, including details of:

The qualifying pension scheme and the “declaration of compliance” submitted to tPR; any unusual arrangements (e.g. employees who may have different contribution rates); employees who have opted out.

Generally, a business that only provides “money purchase” benefits won’t experience any issues relating to pensions on sale, as long as all records are present and up to date.

Defined benefit pensions

Many family-owned businesses historically operated “defined benefit” or “final salary” pension schemes, which made a promise to pay a certain level of pension - a promise which the employer must now stand behind.  Over the past couple of decades, these schemes have become increasingly expensive to provide, requiring ever higher contributions to fund the promised benefits.

The presence of a defined benefit pension scheme may be unappealing to many potential purchasers, and if not dealt with correctly could disrupt the sale process.  If your business is responsible for a defined benefit pension scheme, then you should start planning how it will be dealt with well in advance of any sale.

The first step is to ensure that you have taken any appropriate steps to manage the scheme’s liabilities, and have explored options such as pension increase exchange and flexible retirement options.  You should also ensure that the scheme doesn’t have any hidden “skeletons” such as a failure to equalise normal retirement ages, which might add to the liabilities.  Proper due diligence carried out as you prepare for sale can help to ensure that the process isn’t derailed by unknown issues coming to light.

The ideal route would be for the defined benefit pension scheme to be “bought out” (transferred to an insurance company) in advance of the sale, so that prospective buyers have the certainty of knowing that no further liability exists.  However, in some instances the funds to buyout the scheme may only exist on completion, in which case part of the sale proceeds may be put into an escrow account, which will be used to buyout the scheme after completion. Some potential purchasers may agree to acquire the business along with the pension scheme, but buyers willing to do so are rare, and the value of the sale will be negatively affected.

Our experienced pensions team can help you to review your pension arrangements in advance of a sale, please get in touch with me or a member of the team if you’d like to discuss any pensions issues.

Latest news

1

Three weekly domestic waste collection considered in plans Waste recycling Blackpool

Three weekly domestic waste collection considered in plans

01 Jul 2025

2

Graham Engineering confirms acquisition to a2e Industries Graham Engineering

Graham Engineering confirms acquisition to a2e Industries

01 Jul 2025

3

Training 2000 celebrate 'Good' rating by Ofsted Training 2000

Training 2000 celebrate 'Good' rating by Ofsted

01 Jul 2025

4

Fox Group acquires J Fisher and Sons Colin Fisher, Paul Fox CEO and Gary Fisher.

Fox Group acquires J Fisher and Sons

01 Jul 2025

5

Beever and Struthers strengthen leadership team with new partners Dean Curtis and Joe Diston

Beever and Struthers strengthen leadership team with new partners

01 Jul 2025

Background image for hub sign up block

LBV Hub

Leverage Lancashire Business View platforms

Post your news
Post your events
Post your offers
Build your network
Improve your SEO
Gain coverage in the magazine
Sign-up
Events
LBV123 July/August Launch Event
Lancashire Business View magazine launch
Networking
16 Jul 2025

LBV123 July/August Launch Event

Burnley

08:30 - 10:30

Lancashire Built Environment Conference 2025
BEC 315 X 315 Px
Networking
25 Sep 2025

Lancashire Built Environment Conference 2025

Blackpool Football Club, Blackpool, FY1 6HX

08:30 - 13:00

CMI Level 5 Management and Leadership Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Management and Leadership Course

Preston Campus, Preston , PR1 2HE

09:00 - 17:00

CMI Level 5 Project Management Course
UCLanAerialCampus.jpg.jpg
LBV Hub Seminars
21 Feb 2025 - 21 Feb 2026

CMI Level 5 Project Management Course

Preston Campus, Preston, PR1 2HE

08:00 - 17:00

Business Bike Club – July
Chamber Logo1.png.png
LBV Hub Networking
01 Jul 2025 - 01 Jul 2025

Business Bike Club – July

Various, Lancaster, LA

08:00 - 09:30

Chamber Breakfast Networking – July
Chamber Logo1.png.png
LBV Hub Networking
02 Jul 2025 - 02 Jul 2025

Chamber Breakfast Networking – July

St John's Hospice, Slyne Road, Lancaster, LA2 6ST

08:00 - 10:00

The Marketing Metrics that Matter – July 4
LBV Hub Seminars
04 Jul 2025 - 04 Jul 2025

The Marketing Metrics that Matter – July 4

Door4 Office, Burnley Wharf, Burnley, BB11 1JG

08:30 - 11:00

Tri-Site Survey Equipment Showcase
unnamed (2).jpg.jpg
LBV Hub Seminars
09 Jul 2025 - 09 Jul 2025

Tri-Site Survey Equipment Showcase

Crow Wood Hotel, Burnley, BB12 0RT

09:30 - 16:00

Chamber Summer BBQ
LBV Hub Social
17 Jul 2025 - 17 Jul 2025

Chamber Summer BBQ

The Borough, Dalton Square, Lancaster, LA1 1PP

17:30 - 20:00

Preston Tech Connection: Web3 is Dead. Or is It?
July Longer Banner.jpg.jpg
LBV Hub Networking
29 Jul 2025 - 29 Jul 2025

Preston Tech Connection: Web3 is Dead. Or is It?

Society1, Coworking Space, Preston, PR1 3LT

18:00 - 19:30

Preston Freelancer Meet-Up: July
Longer July Banner.jpg.jpg
LBV Hub Networking
31 Jul 2025 - 31 Jul 2025

Preston Freelancer Meet-Up: July

Society1, Coworking Space, Preston, PR1 3LT

10:00 - 11:30

Cumbria Business Expo 2025
https---cdn.evbuc.com-images-880461633-4862066883-1-original.20241022-110415.jpeg.jpg
LBV Hub Exhibitions
19 Sep 2025 - 19 Sep 2025

Cumbria Business Expo 2025

Carlisle Racecourse, Carlisle, CA2 4TS

09:00 - 15:00

Advertise with us

Reaching 50,000 members, our print, digital and event platforms offer a fantastic way to raise your business profile and help you grow.

Find out more LBV122 Online Graphic
Subscribe now

Weekly news bulletin