(Adds Melrose statement)
LONDON, March 20 (Reuters) - British engineering company GKN , fighting off a hostile takeover bid from Melrose , said on Tuesday it had a plan in place to protect its pension scheme as the two sides locked horns over the latest issue to emerge.
Melrose had said on Monday it would inject about 1 billion pounds ($1.4 billion) into GKN's pension scheme as part of efforts to convince shareholders to back its 7.8 billion pound takeover bid and win over political opponents of the deal.
Shareholders have until March 29 to choose Melrose's offer, or back a plan from GKN's management to split off the group's auto business and combine it with U.S.-based Dana Incorporated, leaving GKN focused on aerospace parts.
GKN on Tuesday sought to highlight the merits of its plan for pensioners. GKN said it had a binding agreement with pension trustees which suited its pensioners and its shareholders.
"GKN has a clear and comprehensive plan to reduce its pension liabilities and eliminate the deficit in its UK pension schemes," GKN's finance director Jos Sclater said in its statement on Tuesday.
GKN noted Melrose's comments on Monday which related to GKN's pension scheme: "These comments are misleading as to the true status of GKN's pension obligations."
Melrose said GKN's deal to combine its auto business with Dana would leave the remaining GKN business saddled with a disproportionate part of the company's British pension scheme liabilities.
"GKN are seeking to hide the true picture," a Melrose spokeswoman said in an emailed statement on Tuesday.
"They are not proposing to make any further payments into the scheme to reduce liabilities. Whereas Melrose will pay 60 million pounds a year for as long as necessary."
The fate of deficit-ridden pension schemes during changes of ownership have been in focus in Britain after department store chain BHS collapsed in 2016.
Some politicians have raised concerns that the GKN scheme would be weakened by Melrose's bid, prompting Melrose to make the 1 billion pound pledge over its ownership period, a huge increase on its previous plan to add 150 million pounds.
Melrose's hostile bid has so far split GKN shareholders. Columbia Threadneedle, a top 10 shareholder in GKN with a 3.4 percent stake according to Reuters data, said on Monday it would reject the offer, joining top 30 investor Jupiter Asset Management's Steve Davies. While Aviva Investors, also in the top 30, has lent support to the Melrose bid.
Reporting by Sarah Young, Editing by Paul Sandle, Kate Holton and Jane Merriman