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Contribution notice issued in Carrington Wire case

Ref: PN15-24
Thursday 28 May 2015

The Pensions Regulator has published a report detailing its investigation into the Carrington Wire Defined Benefit Pension Scheme, leading to a decision to issue a £382,000 contribution notice against an individual who took control of the sponsoring employer.

Earlier this year the regulator announced that an £8.5 million settlement had been reached with two businesses domiciled in Russia – PAO Severstal and OAO Severstal-Metiz.

In April, the regulator’s Determinations Panel ruled that a contribution notice of £382,136 should be issued to a third 'target' – Richard Williams – whose company purchased Carrington Wire Ltd for £1 from Severstal in 2010 and who benefited from a payment of £400,000 from the Russian group.

As a result of the sale, a guarantee provided by Severstal to the pension scheme ceased to have any effect. The regulator and the scheme trustees were only informed of the sale after it had happened.

A section 89 report has now been published setting out the regulatory action taken in the case.

The regulator has also published the Determination Notice detailing the Panel’s decision with regard to Mr Williams.

Stephen Soper, executive director for DB at The Pensions Regulator, said:

"The conclusion of this complex case demonstrates that the regulator will, where appropriate, pursue its avoidance powers to seek to help protect member benefits, including in cases where targets are based overseas."

Severstal acquired Carrington Wire in 2006 but in 2008 explored routes to exit its investment in the Yorkshire-based manufacturing company. In 2010, Severstal informed the trustees, employees and the regulator that it had started a solvent wind-down of CWL and later closed the plant. CWL was left with only one material asset (a property) and no ongoing business, but retained a substantial liability to the scheme. Severstal assured trustees it would continue to honour the guarantee following the wind-down.

However, without informing the trustees or the regulator, Severstal entered into negotiations with Richard Williams, sole director and shareholder of a shell company named Gillico Limited ('Gillico'), for the sale of CWL.

Severstal sold the entire shareholding in CWL to Gillico for £1, with a purported working capital adjustment of £400,000, the majority of which was received by Mr Williams personally. The sale meant that the scheme lost the benefit of the guarantee and became solely reliant on CWL, which Severstal had already wound down.

In November 2012, the regulator issued a warning notice to three potential ‘targets’, indicating its intention to issue contribution notices in connection with the scheme.

Shortly before an oral hearing of the Panel was due to take place in January this year, an offer was made by the Russian companies to pay £8.5 million to the scheme. The regulator agreed that if that sum was paid, it would withdraw its case against the Russian companies. The Determinations Panel determined to issue a contribution notice against Mr Williams in the sum of £382,136 as this was the amount that Mr Williams personally received and has used for his own purposes.

The settlement and the funds sought from the third target will not be sufficient to allow the scheme to avoid entry into the Pension Protection Fund (PPF). The regulator now expects the scheme to complete its assessment period and enter the PPF.

Editor's notes

  1. A Contribution Notice (CN) requires a specified amount of money to be paid into a pension scheme by an individual or a company. As detailed in the Pensions Act 2004, a CN can be issued where the person was a party to an act or deliberate failure to act which was either materially detrimental or which had a main purpose of preventing the recovery of or reducing the amount of a section 75 debt.
  2. The Pensions Regulator is the regulator of work-based pension schemes in the UK. We have objectives to: protect members’ benefits; reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the employer’s plans for sustainable growth (in relation to the exercise of the regulator’s functions under Part 3 of the Pensions Act 2004 only).

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Out of hours 01273 648496

www.thepensionsregulator.gov.uk

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