The Pensions Regulator (TPR) has agreed a £74m settlement for a third defined benefit (DB) pension scheme, part of an investigation into companies failing to meet their employees' pension liabilities.
The settlement relates to thread manufacturer Coats Group Plc (Coats) formerly called Guinness Peat Group, one of the world's largest manufacturers of thread yarn and zips.
It will protect the pension payments for more than 30,000 scheme members following a three-year discussions with the regulator.
As a result of the settlement, Coats has said that it will restart dividend payments to shareholders.
In December, TPR announced its action had resulted in payment of £255m from Coats, helping to safeguard the benefits of approximately 27,000 pension scheme members in the Coats Pension Plan (CPP) and the Brunel Holdings Pension Scheme (BHPS).
Today’s (26 June) report relates to a settlement for the third and final scheme in the investigation, the Staveley Industries Retirement Benefits Scheme (SIRBS), with 3,700 members and an estimated ongoing deficit of £85m.
Coats and the trustee for SIRBS have reached an agreement based on the September 2016 settlement offer which will include an upfront payment of £74m into the scheme, a change in the statutory employer to Coats Limited and a full buy-out guarantee from Coats covering the liabilities of SIRBS.
In light of this agreement TPR has agreed to cease regulatory action.
Mike Clasper, Coats group chairman, said: "Reaching this settlement with Staveley is a good outcome for all parties involved and following our announcement earlier this year, it now completes settlement with all three of our UK pension schemes.
"This, together with our recent entry to the FTSE 250, means Coats can continue to focus on growing the business to the benefit of all our stakeholders"
Overall, the settlements in the case of Coats - and British Homes Stores earlier in the year - have meant that the amount TPR has recovered for DB schemes using its anti-avoidance powers now exceeds £1bn.
Nicola Parish, TPR executive director of Frontline Regulation, said: “The use of our powers in this case has led to an extremely positive outcome for pension savers and the group.
“The ongoing trading operations of Coats have improved and are sufficient to provide ongoing funding for the schemes. This is an excellent result for scheme members, bringing greater certainty that future benefits will be paid in full.
“Today’s report shows that even though our concerns about the funding of the schemes were enough to launch anti-avoidance action and issue Warning Notices, we maintained a strong working relationship with Coats and the trustee, allowing us to be flexible and achieve a fair resolution.
“We will not hesitate to use our Financial Support Direction powers where we see member benefits put at risk, even where the sponsoring employer is solvent.”
In 2013 and 2014, TPR issued warning notices setting out the case for exercising its Financial Support Direction power in relation to three DB schemes sponsored by companies within the Coats corporate group.
Pending the outcome of TPR’s case, Coats agreed to suspend intended payments to shareholders of the proceeds from the sale of its former investments.
