Pension team advise on new structure based on value of global brands

10 June 2011

International law firm Stephenson Harwood has advised two pension fund trustees in the merger of four pension schemes run by the TUI Travel Group, Europe's largest tour operator and owner of Thomson and First Choice holidays. To cut the growing cost of the schemes, TUI Travel has agreed that the merged scheme (advised by SH), and two other TUI Travel pension schemes, will have a limited liability interest in a partnership, set up by TUI Travel, which holds the brand rights to Thomson and First Choice holidays.

Under this arrangement, the schemes will ultimately receive income flows from TUI for using the Thomson and First Choice holiday brands. This is designed to result in an annual income of £16.5 million across the three schemes each year until 2026. The schemes will also receive contributions outside of the arrangement.  If the schemes are still in deficit at 2026, TUI Travel will make payments of up to £275 million across the schemes to cover the shortfall.

Commenting on the arrangement, Mark Catchpole, head of the pensions practice at Stephenson Harwood, said: "Using brand value is a really novel way for TUI Travel to reduce its pensions costs but, importantly, also boost the security of benefits for scheme members. A lot of work went into making the arrangements as beneficial as possible from a member security perspective.  Other companies have started to use property and products to address pension scheme costs, but TUI Travel is the first to use only intangible assets."

The Stephenson Harwood team was led by Mark Catchpole, assisted by Amanda Banister, senior associate in the pensions practice, Stephen Wylie, associate in the corporate practice, Maryanna Sharrock, partner and Jesse Dalton, associate, in the tax practice, and Eifion Morris, partner and Rob Jacob, associate in the IP practice.

Lawyers for the additional pension scheme trustees were Linklaters and CMS Cameron McKenna. Lawyers for TUI Travel were Herbert Smith.

This work follows on from the firm's involvement in the pensions restructuring of Uniq, where the trustees of the pension scheme/PPF were, effectively, given a 90% stake in the company - also a high profile and novel approach to pensions deficit issues.