UK – German-based utility E.ON is putting £420m (€605.8m) into the underfunded pension schemes of four UK subsidiaries to ease a planned merger between them – meaning some asset managers may be dismissed.
Düsseldorf-based E.ON is paying more than half of the total deficit of its four funds, whose funding ratios range from 74% to 90%.
E.ON has authorised the payment to its deficit-hit pension fund, E.ON Holding Group of the Electricity Supply Scheme, worth £3.7bn.
Their total deficit amounts to £728m.
The fund plans to merge its four self-contained sections covering Powergen, East Midlands Electricity, Midlands Electricity and Eastern members this year, E.ON said.
A spokeswoman for the company said that E.ON UK was aiming at concluding the merger by the first half of 2005, but added this was not a proper deadline.
She added the four fund employed external managers but declined to name them. As a result of the merger, which would bring the funding ratio to 93%, some managers may be dismissed, but added the decision was up to the trustees.
The four ESPS sections have a total of 46,000 members, of whom 31,000 are currently retired.
The Powergen scheme, £229m in deficit, would gain £125m. The East Midlands Electricity plan, £93m in deficit, would gain £33m.
Eastern, £281m in deficit, would gain £205m. Midlands Electricity, £125m in deficit, would gain £57m.
Paul Golby, chief executive of E.ON UK said the merger was in the interest of the scheme’s members and trustees and trade unions “ welcomed” it.
He continued that the merger would also promote “ a more efficient and cost effective manner”.
“A special contribution on this scale goes further than many other UK companies in funding their deficits and also emphasises E.ON’s commitment to the UK and to all current and former employees,” Golby said in a statement.
E.ON UK said there would be no change to current scheme members’ current or future entitlements.