LONDON — A Financial Times investigation has found that several UK companies have used a controversial insolvency procedure to offload up to £3.8 billion of pension liabilities.
The investigation found that 17% of the 868 schemes managed by the Pension Protection Fund (PPF) — a fund which picks up pension liabilities from failing companies — had entered the scheme as a result of so-called “pre-pack administration.”
A “pre-pack” is a complex insolvency procedure which allows companies to be sold even as they are being declared insolvent.
However, the Financial Times found that two in three of those pre-pack schemes entering the PPF had involved sales to existing owners or company directors.
That, in turn, indicates that some solvent companies are simply using the scheme to offload expensive pension liabilities onto the statutory fund, which is funded by a levy on all private-sector, defined-benefit pension plans.
Companies named in the investigation which used pre-pack arrangements but are still trading include turkey producer Bernard Matthews, bed retailer Silentnight, and textile group Bonas.
Labour MP Frank Field, chair of the parliamentary work and pensions committee, said the investigation raised “real concerns” about whether adequate protections were in place against PPF abuse.
He added: “We intend to pursue these issues further as part of our ongoing work on DB pensions.”
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