Melrose has promised to “fully safeguard” the pension schemes of engineering firm GKN, following a £7.4bn takeover bid.

The move follows a warning from the trustees of GKN’s defined benefit schemes issued yesterday (Tuesday 17 January 2018), which raised concerns over the schemes' £1.1bn deficit.

In response to GKN’s trustees, Melrose said that the numbers published are “entirely in-line” with the firm's reading of the pension exposure at GKN, which currently has 32,000 members.

It said: “In relation to existing pensions contributions of GKN's management and employees will be fully safeguarded in accordance with the applicable law. The accrued benefits for existing members of GKN's defined benefit pension schemes will not be affected.

“The numbers published are entirely in line with Melrose's own reading of the pension exposure at GKN and Melrose looks forward to meeting the trustees as soon as is appropriate.”

The firm added that GKN's UK defined benefit pension schemes will remain closed to admission of new members and to future accrual.

In a trustee statement issued yesterday, they said: “Any material change to the corporate and capital structure of GKN would lead the trustees to reassess the strength of covenant going forward and determine appropriate funding plans based on that covenant and its associated level of risk.”

The trustee added that it expects “full engagement with management and with any relevant third parties, at the appropriate time, to ensure satisfactory protection and mitigation for any impacts arising from any change in the strategic direction or future ownership of the company," and in any discussions, "the trustees' focus would be to safeguard members' interests."

GKN rejected an initial £7bn bid from Melrose, calling the bid “opportunistic”, according to the Financial Times.

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