One of the most amusing stories that has arisen in the past week (although it has a serious purpose) is the proposal that Diageo, the drinks conglomerate has come up with to try and solve its Final Salary Scheme funding deficit. As readers may know, when an actuarial valuation reveals a deficit, the law requires that the Trustees and the Employer get together to try to agree a cunning scheme to repair that deficit over a period of time. This is called a Recovery Plan.
Posts under ‘Pension deficits’
Who’d have thought it…?
Although it is really something of a statement of the bleedin’ obvious, PwC have recently issued a report which after extensive (and no doubt extremely expensive) research has concluded that Final Salary Pension Schemes will have ceased to exist within 10 years. This is not exactly ground breaking news to those of us within the Pension Industry who have been watching the death throes for several years now.
Robbing Peter to pay Paul…
This weeks’ items – another massive bailout (potentially) and a oopsie by a pension industry ‘good guy’
First, the Coalition Government has announced it’s intention to sell off part of the Royal Mail. So far so predictable. The kicker in this particular tale is that the Royal Mail is currently sitting on an £8BILLION (yes you read that correctly, £8 BILLION!!!) deficit and that’s just what’s been revealed in the company accounts. The Actuarial Valuation results due soon are expected to show an even bigger deficit. This will not ordinarily make it a particularly attractive proposition for any potential buyer.
They do things differently up there…
Been a bit quiet on the pension front this week – must be something to do with some vote thingy going on in the country. Pensions seem pretty low on the politicians agenda (it’s that ‘too difficult’ basket again) so I thought this week I’d actually blog about a bit of law (shock horror!!)
The Outer House Court of Session (it’s a Scottish court for all you Sassenachs) has put the boot into the English once again over of all things, the equalisation of pension rights in schemes.
Hard to Digest…
So, Readers Digest (or rather the pension scheme of course) has now entered the PPF Assessment process as was almost inevitable following the calling in of the Administrators in February. Readers of my blog will know that RD had been in discussion with the PPF prior to this in relation to its multi million pound deficit and came a cropper when TPR refused to accept a negotiated deal that would have seen an innovative resolution including a significant cash injection and a large equity stake in the US parent company being taken by the scheme trustees.
It seemed like a good idea at the time…
Sometimes, its not just what you know…it’s who. The Pension Regulator has just found this out having been sent off with a flea in its ear by both the US and Canadian Courts in its attempts to enter the ‘world domination’ market by thinking – completely wrongly as it turns out – that it had jurisdiction in those countries.
The background is it’s attempt to make the overseas parent companies of the Nortel UK Pension Schemes to pay an additional contribution to cover the significant deficit. The US and Canadian courts have given permission for the overseas parent to ‘ignore’ the demand for £2.1 billion. Nortel is bankrupt by the way.
The Law of Unintended Consequences
In a mid week update to my Monday posting, Readers Digest has just announnced it is going into administration in the UK due to the size of the DB pension scheme deficit.
What seems to be most interesting in this case is that the parent company seems to have been in negotiation with the Pension Protection Fund about making payments to the scheme (presumably to ensure that the compromise it was contemplating would not prevent entry to the PPF should it be necessary). However, this ‘agreement’ did not meet whatever stringent test the Pension Regulator had in mind. Result – RD goes bust and the scheme probably ends up in the PPF anyway. Well done tPR – way to go!!
It’s Just Money….
A small article in that must read magazine for all lovers of …er….furniture – Cabinet Maker – (and with thanks to ‘My Company Pension’ for pointing it out) really sums up the current parlous state of Defined Benefit pension provision in the UK today.
HJ Berry a Preston based furniture manufacturer, has gone into administration with the £9 million black hole in it’s pension fund being a major contributory factor in its insolvency. It’s 85 staff members are likely to find themselves without a job soon and while of course, there is the possbililty that their pensions will be protected to a large extent by the Pension Protection Fund, (assuming the scheme is eligible) nevertheless, the situation is symptomatic of the state not only of the pension universe but also of manufacturing industry in the UK in 2010.
The Eagle has Landed…
Well, it’s not been the most exciting of weeks in the pension universe but I suppose the big story – well big for us pension junkies – is the announcement made by Angela Eagle that the Guaranteed Minimum Pension element of a pension will have to be equalised for men and women.
In fairness, she did state that this would only apply in respect of schemes falling into the Governments ‘junior’ lifeboat, the Financial Assistance Scheme, but there are few of us who believe that the principle will not be extended to the ‘big’ lifeboat, the Pension Protection Fund and from there to all schemes that carry GMP’s for their members, that is, those who contracted out of the second limb of the state pension arrangements.
Thrown to the Wolves
The Conservatives have indicated that if the PPF ever faces financial meltdown due to increasing claims on its purse, were they to be in power, they would not bail it out. Brave words from the sidelines, but I wonder whether in reality they would be willing to face the wrath of the ageing electorate by pulling the plug on it were (for arguments sake) BA and a few other big players hit turbulence.
Jennie advises large multi-employer schemes as well as smaller single employer arrangements and has wide experience of both Defined Contribution and Defined Benefit schemes. Jennie qualified in 1986 originally as a criminal prosecutor. She sits as a Magistrate in her local justice area and is an Approved Chairman and Deputy Chair of the Bench Training and Development Committee. Jennie was formerly Legal Director of the Occupational Pensions Regulatory Authority. When her busy practice allows, Jennie likes to indulge her passion for travelling. To consult Jennie on any corporate Pensions matter, please call her on +44 (0)20 7749 2700 or send her an email by clicking below: