TPR reaches £255m settlement in Coats anti-avoidance case
Friday 16 December 2016
Anti-avoidance action taken by the Pensions Regulator (TPR) will result in payment of £255 million from Coats Group Plc (Coats), helping to safeguard the benefits of approximately 24,000 pension scheme members.
In 2013 and 2014, TPR issued Warning Notices (WNs) setting out the case for exercising its Financial Support Direction (FSD) power in relation to three defined benefit (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.
TPR has now secured a settlement with Coats for two of the schemes covering approximately 90% of the total membership, and will discontinue its anti-avoidance action in respect of those two schemes.
The schemes covered by the settlement are the Coats Pension Plan (CPP) and the Brunel Holdings Pension Scheme (BHPS).The settlement will secure for scheme members all of the available cash following the sale of Coats’ former investments.
Executive Director of Frontline Regulation Nicola Parish said: “This is a substantial settlement of our FSD case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do.
“This case is a great example of how even after WNs have been served, TPR, the company and the trustees can work together to achieve a good outcome for members without the need to formally enforce our powers through the Determinations Panel.
“We will continue to take a commercially-minded and pragmatic approach when pursuing the use of our powers to achieve good outcomes for scheme members.
“In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”
The main points of the agreed proposal are:
- Upfront payments totalling £255.5 million into the two schemes (inclusive of the agreed Recovery Plan contributions paid to the BHPS since 1 January 2016). The allocation of these funds will ensure the two schemes are left in a similar funding position.
- A change in the statutory employer for the two schemes to Coats Limited, representing an improvement in the covenant support for the schemes.
- A full guarantee from Coats of the liabilities of the two schemes.
A comparable offer has been made to the trustees of the third scheme – Staveley Industries Retirement Benefits Scheme trustees and discussions are ongoing.
- Coats Group plc (Coats) – formerly known as Guinness Peat Group plc – is the ultimate parent company of Coats plc. Coats is one of the world’s largest manufacturers and distributors of sewing threads. There are three DB schemes sponsored by entities within the Coats group and today’s announcement relates to two of them: the Coats Pension Plan (CPP) which has over 20,000 members and as at 1 April 2015 an estimated deficit of just over £400 million on a scheme specific funding basis; and the Brunel Holdings Pension Scheme (BHPS) which has approximately 3,000 members and as at 1 April 2015 an estimated deficit of approximately £80 million on a scheme specific funding basis. The Staveley Industries Retirement Benefits Scheme (SIRBS) has approximately 3,700 members and as at 31 December 2013 had an estimated deficit of just under £85 million on a scheme specific funding basis.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to 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 sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).
David Morley 01273 662091
Matt Adams 01273 662086