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Merging Schemes: An Economic Analysis of Defined Benefit Pension Scheme Merger Criteria

  • C. M. S. Sutcliffe (a1)
  • DOI:
  • Published online: 01 May 2011

The conditions under which pension schemes merge is an important issue which has been under-researched. Mergers can affect the strength of the sponsor's covenant and the balance of power between the trustees and the sponsor, as well as the deficit or the surplus of the receiving scheme and its funding ratio. This paper sets out two financial criteria to be met by any pension scheme merger: no profit or loss on merging with another scheme; and no dilution of the funding ratio. After defining a merger basis for valuing the assets and liabilities, and allowing for adjustments to the funding ratio via side receipts and payments; it is shown that, whether or not these criteria are met, depends on the state of the financial markets.

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I. Greenstreet (2002). Effective management of pension scheme mergers. Journal of Pensions Management, 7(3), 267285.

J.D. Hammond (1962). Pension financing in corporate consolidations. Journal of Risk and Insurance, 29(4), 503516.

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Annals of Actuarial Science
  • ISSN: 1748-4995
  • EISSN: 1748-5002
  • URL: /core/journals/annals-of-actuarial-science
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