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CBI pension scheme holds up merger with Make UK

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The CBI’s pension scheme has held up a potential merger between Britain’s biggest business lobby group and Make UK, the manufacturers’ trade body, according to people close to the discussions.

The two groups have been discussing a close partnership — or even full merger — for several months.

The CBI was plunged into crisis over allegations of sexual misconduct earlier this year, putting its finances under strain after a large number of members either suspended or cancelled their memberships.

A merger with Make UK, which represents manufacturing companies, is seen as a potential lifeline for the beleaguered CBI, which has been closing most of its international offices and preparing to lay off staff.

People close to the discussions said the talks were at an “advanced” stage but could not conclude until the CBI has hived off its pension scheme, most likely through a deal with an insurance company. “The biggest issue is around the pension fund,” said one person.

Another person agreed that the pension scheme was the stumbling block, adding: “The idea that everyone has their pens out and are poised to sign the contract is not the case.”

Although the pension scheme is thought to be in surplus, the process of concluding a deal with an insurance company, including obtaining regulatory approval, could take a long time, according to the individuals.

“It’s not that there’s a problem with the regulator, it’s just that these things take time, and the CBI doesn’t have time,” said one of the people close to the talks. “My concern is that everything is in place but will the regulator move fast enough to allow this to happen quickly enough?”

The CBI and Make UK declined to comment.

According to the CBI’s latest published accounts, the pension plan had an accounting surplus of £5mn at the end of 2021.

The increase in interest rates over the past 18 months has led to a significant improvement in defined benefit pension plan funding levels, with the majority now in surplus after two decades of funding shortfalls.

Many of these defined benefit plans can now afford to do deals with insurers to take over the schemes’ liabilities, a move that removes responsibility for the pension from the employer.   

But a parliamentary inquiry this week heard that smaller pension schemes, of £100mn or less in assets, were facing more stumbling blocks than larger plans in securing deals with insurers to take over their liabilities. The CBI scheme had £108mn in assets in 2021.

“A lot of schemes want to buy and insurers can be choosy,” said Matt Tickle, partner and chief investment officer at Barnett Waddingham, the pension consultants.

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