Regulator under fire over Monarch Airlines pension deal

Regulator under fire over Monarch Airlines pension deal

The Pensions Regulator (TPR), the watchdog for work based pension schemes in the UK, has been accused of lacking teeth to tackle companies which want to avoid their responsibilities in light of the deal to offload the Monarch Airline pension scheme.

Frank Field MP, chairman of the Work and Pensions committee, made the comments in a letter regarding the deal struck in 2014 by the Pension Protection Fund (PPF) and the regulator over Monarch Airlines pension scheme amid the £1 sale of the company by the Mantegazza family to private investment company Greybull Capital.

Mr Field has written to the chair of the PPF querying the terms of the negotiation.

The letter stated: “Compared to the hundreds of millions pounds of debt they were being released from, the [pension] deal was a good one for the Mantegazzas only.

"Both their initial derisory offer and the final £30m one betray the inadequacies in TPR’s armoury of anti-avoidance powers.

"There is clearly nothing to induce a company, the family head of which is reportedly worth £3.4bn, to come to the table with a serious offer.

“The PPF’s own head of restructuring is reported as saying that negotiations were hamstrung by both sides’ knowledge that the Mantegazzas could just let Monarch fail and dump the pension scheme into the PPF.

"Had the Mantegazzas had the threat of punitive fines such as we have recommended hanging over them, this deal would have been concluded much more satisfactorily.”

But Alan Rubenstein, chief executive of the Pension Protection Fund, hit back in his reply to Mr Field, saying the deal reached over the pension scheme was better than no deal at all.

“Given that the recover to the Monarch scheme in the event of insolvency would have been zero, we and ultimately our levy payers are £30m better off as a result of the upfront cash payments we negotiated.

"Depending on the outcome of the administration process, we may in time receive additional recoveries from our secured loan notes negotiated as part of the RAA.”

The RAA is the restructuring mechanism Regulated Apportionment Arrangement.

Mr Rubenstein added: “It should be noted that one of our published principles when considering a RAA proposal is that we must be sure that the pension scheme would not be better off by TPR exercising its moral hazard powers, through the issue of a contributions notice or financial support direction.

"In this case, TPR considered that there were no grounds for the use of their powers and subsequently provided clearance for the transaction. It is difficult to speculate on whether a different anti-avoidance regime would have resulted in a different outcome.”

The PPF was established to pay compensation to members of eligible defined benefit pension schemes, when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover Pension Protection Fund levels of compensation.

Previous high profile deals include BHS which went into administration in April 2016. A £363m settlement with Sir Philip Green, the department store's former owner, was reached to fund a new independent pension scheme for 19,000 former BHS workers.