Defined Benefit  

Hoover in talks to offload DB scheme to PPF

Hoover in talks to offload DB scheme to PPF

Hoover UK has confirmed it is in talks with The Pensions Regulator to offload its defined benefit scheme to the Pension Protection Fund.

Such a move would see the scheme's 7,800 members take a 10 per cent cut to their benefits.

The firm is seeking to persuade the regulator that it will never be able to afford to meet its obligations to members, through what is known as a "regulated apportionment agreement".

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This involves a third party evaluation of the company's finances.

Hoover UK, which is owned by Italian firm Candy Group, must also persuade the scheme's trustees that the move is in the best interests of its members.

If TPR and the trustees agree, the cost to the company of moving into the PPF would be £250m. 

According to the most recent evaluation, the scheme has a deficit of £194m.

A spokesperson for Hoover Ltd said: "Like many other companies, Hoover Ltd. has for some time been working collaboratively with its pension scheme trustees and The Pensions Regulator to find a long term solution to the deficit in its defined benefit pension scheme.

"We are committed to finding an outcome that is in the best interests of all the members of the Scheme, current employees and the Company. These discussions are ongoing." 

The spokesperson added that company's day-to-day operations were "not affected" by the discussions with the regulator.

A final decision is not expected for several months.

The news comes a week after the government launched a green paper on the future of the defined benefit sector.

DB schemes have struggled in recent years with rocketing deficits and some high-profile collapses, most notably that of the BHS scheme last year.

However, the government green paper downplayed concerns the entire sector was in crisis.

The paper stated: "Whilst recognising that the system may not be operating optimally in all areas, our main conclusion is that there is not a significant structural problem with the regulatory and legislative framework."

Nevertheless the paper floated a number of major changes, such as allowing schemes to reduce or abolish the indexation of annual pension increases, and the creation of a "superfund" to allow small DB schemes to consolidate.

Speaking to FTAdviser following the release of the paper, pensions minister Richard Harrington said that as yet the government had made no final decisions, adding everything was "up for grabs".

Mr Harrington's predecessor Ros Altmann criticised the government's approach in the green paper, claiming it was being too complacent about the sustainability of the DB sector.