The trustees of GKN’s pension schemes have reached an agreement with Melrose Industries, whose hostile bid for the UK-listed engineering company will be put to a shareholder vote next week.

The trustees had already reached an agreement with GKN, which is linked to the company’s spinning off the GKN Driveline subsidiary into a joint venture with US firm Dana.

This week’s agreement meant the schemes would emerge with better funding arrangements regardless of whether Melrose was successful with its bid.

“It means that there are now firm commitments from both Melrose and GKN to support the pension schemes, whatever the outcome of the shareholder vote on 29 March,” the trustees said.

“We have taken extensive advice and are satisfied that both agreements provide appropriate mitigation to the schemes and that they are in the best interests of our members.”

Under the deal with Melrose, the acquisition and turnaround specialist will make cash contributions of up to £1bn (€1.1bn).

This would be based on an initial contribution of £150m and a doubling of annual contributions to £60m for the 2012 scheme.

Of the initial £150m, £60m will be paid to the 2016 scheme to secure self-sufficiency using a discount rate of Gilts plus 25 basis points.

The £60m annual contributions to the 2016 scheme plus “an agreed formula for contributions on disposals” are intended to help secure full funding for the 2012 scheme on the basis of a discount rate of Gilts plus 75 basis points.

Payments to the schemes would be secured by a guarantee from Melrose.

Christopher Miller, chairman of Melrose, said: “This agreement would significantly improve the position of the members of GKN’s pension schemes and is in line with our original plans for the business.”

However, GKN lashed out at the plans, saying Melrose’s proposal would destroy shareholder value, “does nothing to address the size of the overall pension liability of the group”, and provided little clarity on the timing of future payments into the scheme.

The GKN schemes had a reported deficit of £674m under international accounting standards (IAS 19). According to the trustees, they had a combined shortfall of £1.9bn as of 30 September 2017 based on the amount of money needed to enable both schemes to be transferred to an insurer through a buyout.