Northern Foods Pension Scheme - Regulatory intervention report

We took action to protect more than 13,000 members of the Northern Foods Pension Scheme (NFPS) when we became concerned about the employer’s ability to support the scheme.

Our intervention led to productive discussions with all parties concerned. By working together, we achieved improved support and a stronger employer covenant for the NFPS. It will now have a much-improved prospect of being able to pay its members’ benefits in full.

In this case, a support package was agreed for the NFPS which includes:

• an agreed minimum level of contributions which will see around £300 million paid into the scheme by June 2034
• a replacement of the scheme’s sole statutory employer with a significantly stronger entity
• stronger and additional guarantee arrangements

This report shows we will take action when we consider that a scheme is not being treated fairly in comparison to other stakeholders. It also shows we may pursue financial support from entities outside the employer’s immediate group to protect members.

This case is a good example of how we can use our enforcement powers to support a negotiated settlement to strengthen scheme funding. When we engage with our regulated stakeholders, we use all of the tools available to us to deliver good outcomes for members. While we issued a warning notice in this case, we would much rather work with stakeholders to put things right earlier, before we need to use our powers.

Published: 4 December 2025

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Background

The NFPS was established in 1951. It was a multi-employer scheme until 2016 when Northern Foods Limited (NFL) became the sole employer. NFL was the parent company of several trading companies operating food manufacturing businesses.

NFL was a FTSE listed entity until it was acquired by Boparan Holdings Limited (BHL) in 2011. BHL is a private company and its main subsidiary, 2 Sisters Food Group Limited, is a major supplier of chicken products in the UK. To finance the acquisition, and to refinance NFL’s existing debt, the BHL group issued more than £600 million of bonds, which were refinanced by the issue of more than £800 million of bonds in 2014. The 2014 issue included £250 million of bonds due for repayment in 2019 with the remainder due for repayment in 2021. The bonds benefitted from a range of guarantees provided by a number of BHL group companies.

The bonds due for repayment in 2019 were redeemed in two tranches in BHL’s financial year ending 27 July 2019. This followed the sale of Goodfella’s Pizza, a business owned by NFL, for approximately £200 million in April 2018. Three further NFL businesses were sold during 2019. Manton Wood was sold in January, Green Isle Brands in February and Matthew Walker in October resulting in aggregate proceeds of £200 million. The pension scheme did not receive any of the proceeds from these sales.

To provide mitigation for the shrinking direct covenant provided by NFL, BHL agreed with the scheme’s trustee to put in place a partial guarantee for the scheme’s section 75 deficit. This deficit is the shortfall in the amount needed to cover members benefits in full by purchasing annuities. The guaranteed amount increased with each business sale from NFL, in proportion to the size of the business that was sold.

In 2020, the group began investigating options for redeeming the bonds due for repayment in 2021 and lowering the overall level of debt. In the face of difficult market conditions for debt refinancing, BHL decided to sell Fox’s Biscuits in October 2020 for £255 million. This was another sale of a large NFL business which was critical in allowing the group to refinance the 2021 bonds in full the following month. Although the scheme received 30% of the net disposal proceeds, and there was an increase to the amount covered by guarantee, the majority of the proceeds were used in the refinancing, alongside funds raised from the issue of £475 million of new bonds due for repayment in 2025.

Regulatory action

We opened an avoidance case following the sale of NFL businesses which started in 2018.

Along with the scheme’s trustee, we had become increasingly concerned about the material reduction in the strength of the scheme’s direct covenant.

While a partial guarantee for the scheme’s deficit had been put in place in 2018 (with subsequent increases to the amount), we considered this mitigation to be inadequate. We considered the guarantee represented a less robust covenant for the scheme than having direct recourse to a financially strong employer.

In addition, while the trustee had negotiated that the scheme would receive 30% of the net proceeds from the sale of Fox’s Biscuits in 2020 and from any subsequent sales, and while the scheme would be supported by a specific guarantee from BHL in relation to payments due under the schedule of contributions, we were concerned that the reducing scale of NFL’s activities meant it would be unable to continue to support the scheme on its own.

We considered the scheme was not being treated fairly compared with the group’s other stakeholders as it did not receive an equitable share of the proceeds from the sales of businesses in 2018 through to 2020, which were used to refinance the bonds due for repayment.

Our investigation

Our investigation highlighted the following factors:

• BHL had become the effective source of support for the NFPS as the value of NFL’s direct covenant support had declined.
• BHL’s financial position was constrained. At the time of opening our investigation, the group had consolidated net liabilities of approximately £90 million, before the NFPS deficit.
• The group had requested a number of revisions to the schedules of contributions agreed with the trustee of NFPS.
• We noted that in each year since BHL had acquired NFL in 2011, there had been a material volume of related party transactions between BHL group companies and associated entities now owned by Boparan Private Office Limited (BPO).
• BHL and BPO have common shareholders. The related party transactions included both regular trading activity and asset/business transfers. BPO’s financial strength contrasted sharply with that of BHL, with BPO having a strong balance sheet. At the end 2024, the BPO group had consolidated net assets of £560 million.
• While there was no evidence to suggest that any of these related party transactions were conducted on anything other than arm’s length terms, it was clear that a material proportion of some of BPO’s key subsidiaries’ annual profits and their net asset values were generated from the group’s transactions with BHL group entities.
• We formed the view that BPO had benefited indirectly from the disposals of NFL’s businesses, which had facilitated BHL’s bond refinancings in 2019 and 2020, thereby enabling BHL to continue to trade as a going concern.

Warning Notice

Following our investigation we concluded it would be appropriate to seek formal financial support for the scheme from both BHL and BPO directly, as well as from a number of subsidiary companies in both groups.

We issued a warning notice to all affected parties in July 2024 seeking financial support in accordance with section 43 of the Pensions Act 2004.

Outcome

Following the warning notice we had several productive meetings with representatives of both BHL and BPO whilst continuing to work closely with the scheme’s trustee. By working together, we have achieved a joint package of support that has been put in place for the scheme.

Key features include:

BHL:

• The group’s main trading entity, 2 Sisters Food Group Limited, has replaced NFL as the scheme’s sole statutory employer.
• Future contributions have been agreed that are expected to lead to the scheme being fully funded on a prudent low dependency basis by 2034. In aggregate, the agreed contributions over this period amount to approximately £300 million, substantially greater than the previous schedule of contributions that was in place for the scheme.
• BHL’s guarantee to the scheme has been extended to cover all ongoing liabilities, including the scheme’s full section 75 debt.
• All material BHL subsidiaries, including any acquired in the future, will also provide guarantees for the scheme’s section 75 debt, in addition to arrangements already in place, including second ranking security.
• As is the case for the existing BHL unsecured guarantees to the scheme, these additional guarantees are also unsecured and will rank behind the group’s debt.
• The scheme will receive 100% of the net disposal proceeds from one of the smaller of NFL’s remaining businesses and 30% from the larger business, if either is sold.

BPO:

• BPO has put in place a significant guarantee for contributions due to the scheme from the scheme’s statutory employer and any amounts due from BHL.
• The guarantee is unsecured and ranks behind the group’s debt.

The scheme’s deficit measured on a section 75 basis has reduced considerably in recent years, and was estimated to be approximately £372.1 million as at 31 March 2025, compared to approximately £1 billion at 31 March 2019.

We believe that BHL has put in place a realistic funding plan for the scheme to reach self-sufficiency, with material contingent support available if required from BPO.

By working with the trustee, the employer’s parent company and associated businesses, we achieved more support both from the group which owns NFL and from BPO. Along with the scheme’s trustee, we believe the likelihood of the scheme’s members receiving their full benefits has substantially increased.