Nature of benefit

Defined Contribution - most retirement plans are DC arrangements.

Defined Benefit - there are still a few DB plans, mostly in the public sector.

Types of plan

1. Pension funds - occupational plans of which a max 1/3rd of the benefit can be commuted on retirement;
2. Provident funds - occupational plans of which, historically, up to 100% can be commuted on retirement but which are subject to the same commutation limits as pension funds in respect of post 1 March 2021 accrual; or
3. Retirement annuity funds - personal pension arrangements.
4. Umbrella funds - these are retirement funds (pension or provident) established for participation by multiple non-associated employers (akin to master trusts in the UK). Over the last decade, lots of employers have moved from stand-alone funds to umbrella funds.

On a business transfer, the transferee employer is automatically substituted in the place of the transferor employer in respect of all contracts of employment and there is no pensions carve out from this as there is with TUPE in the UK. The transferee employer will meet its obligations under the automatic transfer legislation if it employs the employees on terms and conditions that are on the whole not less favorable than pre-transfer terms. This gives a transferee employer a degree of flexibility in the benefit package it offers transferring employees.

It is common practice (but not mandatory), where employees join a new plan on a transfer, for there to be a bulk transfer of their accrued benefits to the new plan without consent. The transfer must be agreed to by the transferring and receiving plans and approved by the FSCA (financial services regulator) which must be satisfied that the transfer is reasonable and equitable and fully recognizes employees' accrued benefits (this is typically not an issue in a DC-to-DC transfer). The transfer process often takes 6 months or more, but is a post-completion issue and so will not delay completion.

On a share transfer, the purchaser will take on the pension obligations that are contractual in nature or derive from any Collective Bargaining Agreements (CBA) which continue following the transfer. The Buyer's ability to amend pension benefits going forward without employees' consent will depend on the terms of the employment contract and any applicable CBA.