Last checked at 26 Mar 2013 14:45
Renold plc
("Renold" or "the Company" or "the Group")
Proposed UK pension scheme merger and future funding
Renold, a leading international supplier of industrial chains and related power transmission products, today announces that it has reached agreement with the Trustees of the UK defined benefit pension schemes to merge the schemes and put in place a new long term funding plan.
Scheme merger
Agreement has been reached to merge the three closed UK defined benefit pension schemes into one and to wind up the other two schemes. The merger will lead to a significant reduction in administration costs of approximately £0.5m per annum. The merger and wind up process itself is expected to be substantially complete during the first half of the next financial year.
Future funding basis
The merged UK pension funds will be underpinned by a 25 year asset backed partnership structure which will provide annual cash contributions of £2.5m to the pension fund, with annual increases linked to RPI and capped at 5%. The present value of this funding stream will be fully recognised as a pension fund asset in the accounts of the merged scheme and will remove £40.0m of the funding basis deficit (estimated at £63m in January 2013). The new arrangement replaces all other existing funding arrangements for the UK defined benefit schemes.
Impact on the Group
The underlying reduction in cash administration costs is expected to be £0.5m per annum. In order to support further investment in the business, the Trustees have also agreed to pay the first £0.5m of the remaining expenses (the Company will fund any excess each year). The expected net impact of the agreed changes is therefore a reduction in the Company's annual cash costs of £1.0m. In the first year this will be partially offset by the partnership set up costs and the costs of executing the merger itself.
A reduction in the gross pension assets and liabilities reported in the Group's consolidated accounts is expected once the merger is complete. However, the £40.0m asset recognised in the accounts of the merged scheme is not expected to be recognised in the Group's consolidated accounts. The new arrangements are also not expected to have a substantive net impact on the Group's tax position.
Robert Purcell, Chief Executive of Renold, commented:
"The merger of the schemes will deliver a real reduction in annual cash funding of £1.0m. The support of the UK Trustees will allow us to fund additional investment in the business and will help the new management team to deliver long term and sustainable improvement in the Group's performance for the benefit of all of our stakeholders."
26 March 2013
ENQUIRIES:
Renold plc | Tel: 0161 498 4500 |
Robert Purcell, Chief Executive Officer | |
Brian Tenner, Finance Director | |
Arden Partners (Broker) | Tel: 020 7614 5917 |
Chris Hardie | |
College Hill (Public Relations) Mark Garraway Helen Tarbet | Tel: 020 7457 2020 |
NOTES FOR EDITORS
Renold is a global leader in the manufacture of industrial chains and also manufactures a range of torque transmission products which are sold throughout the world to a broad range of original equipment manufacturers and distributors. The Company has a reputation for quality that is recognised worldwide. Its products are used in a wide variety of industries including manufacturing, transportation, energy, steel and mining.
Further information about Renold can be found on their website at: www.renold.com