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Claiming back pension deficit payments

Wednesday, September 26, 2012

Claiming back pension deficit payments

Some Clients seek to disallow the additional costs arising from pension deficits because they maintain that the deficits are historical liabilities which they should not be paying for. Typically their argument is that equity values will recover overtime and that the deficit will close or move to surplus. In such an event it is unlikely that the Contractor would share the benefit and therefore the pain should not be borne by the Employer when the opposite is true.

The NEC and Yellow Book Target Costs Contracts permit the payment of legitimate employment costs and providing the payment schedules have been agreed with the Pension Trustees the costs are considered to be legitimate current costs and thus should be paid. The exact mechanism on how the deficit is charged to a Contract has to be considered on an individual Contract basis, but it must be auditable and relate back to the agreement with the Trustees.

It is also interesting to note that many of the same Employers who are in regulated markets have made representations to the Regulator to increase their charges to compensate them for their deficit repayments.

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