Anti-avoidance action taken by The Pensions Regulator will result in payment of £255m from Coats Group, helping to safeguard the benefits of approximately 24,000 pension scheme members.
Across 2013 and 2014, the regulator issued warning notices which set out the case for exercising its Financial Support Direction power in relation to three defined benefit schemes, sponsored by companies within the Coats corporate group.
Coats agreed to suspend intended payments to shareholders of the proceeds from the sale of its former investments, pending the outcome of the regulator's case.
The Pensions Regulator has now secured a settlement with Coats for two of the schemes covering approximately 90 per cent of the total membership, and will discontinue its anti-avoidance action in respect of those two schemes.
Schemes covered by the settlement are the Coats Pension Plan and the Brunel Holdings Pension Scheme, and the settlement will secure for scheme members all of the available cash following the sale of Coats' former investments.
The main points of the agreed proposal are upfront payments totalling £255.5m into two schemes, inclusive of the agreed Recovery Plan contributions paid to the BHPS since 1 January 2016.
Allocation of these funds will ensure the two schemes are left in a similar funding position.
Also agreed was a change in the statutory employer for the two schemes to Coats Limited, representing an improvement in the covenant support for the schemes and a full guarantee from Coats of the liabilities of the two schemes.
Executive director of frontline regulation Nicola Parish said: “This is a substantial settlement of our FSD case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do.
“This case is a great example of how even after warning notices have been served, TPR, the company and the trustees can work together to achieve a good outcome for members without the need to formally enforce our powers through the Determinations Panel.
“We will continue to take a commercially-minded and pragmatic approach when pursuing the use of our powers to achieve good outcomes for scheme members.
“In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”
ruth.gillbe@ft.com
