A number of things happened in 2016 which went against what a lot of intelligent commentators said would happen.
Intelligent commentators, many of them experts in such things, confidently predicted that although it would be close run thing, the United Kingdom would vote to remain within the European Union. Some of the same commentators confidently predicted that, although it might be a close or closer run thing, Mrs Hillary Clinton would be elected as the 45th President of the United States of America (USA). As the intelligent specialist commentators looked on in something akin to stunned silence as they were categorically proved wrong by events (by which Pensions News (PN) means that in some cases, commentators were stunned but not necessarily in silence), a former member of the UK Government pronounced that Britons had “had enough of experts”.
As he watched the news which reminded him that, on Friday 20th January, Mr Donald Trump will be sworn in as the 45th President of the USA, PN thought about the sequences of events referred to above and the sequence of events which has led to the event which will take place in the USA today (Friday 20th), PN considered how he probably didn’t want to know (from experts or non-experts) how it had all happened, all he knew was that it was happening and was filling the news with a lot of hype by which he was supposed to be stunned but somehow wasn’t. In fact (and PN speaks for himself here), PN was reminded of words uttered by the late Gertrude Stein; “it is remarkable how I am not interested”.
So it is that PN is able to put events referred to above to one side and, instead, comment on a couple of pension stories which somehow go against what the experts may have predicted but in what PN feels is not a bad way. For this reason (mainly), the stories are interesting to PN.
PN noticed (in the Independent of 19 January) that a former chairman of the London Pension Fund Authority (Mr Edi Truell) has offered to take over the occupational pension scheme which is currently sponsored by Tata Steel. In so doing, Mr Truell, has stated that his “deal” would enable pension scheme members to retain all of their existing rights to benefits. He added that this could be achieved by investing some of the pension scheme’s monies in “high-yielding infrastructure projects”. The chairman of the pension scheme trustees has indicated that Mr Truell’s plan will not work (although what he actually said was that the plan was “not viable”) on the basis that it will work only if certain commitments are made by the Pensions Regulator, Tata Steel and the UK Government. Although PN enjoyed reading about a large pension scheme which could be rescued (notwithstanding scepticism shown by certain experts), he worried about (a) the bit about “commitments” being required from the UK government and (b) the lack of enthusiasm for taking the pension scheme displayed by other potential purchasers of the steel business. One such potential purchaser, ThyssenKrupp, has (according to informed experts) shown no interest in taking on the pension scheme. This may mean that we can probably expect the German group to take Tata over, pension scheme and all, early next week although PN does not actually believe this (somewhat half-hearted) prediction. PN is more concerned that there may not be many (so-called) high-yielding infrastructure projects for a pension scheme to invest its monies in and feels that this may be one of the main concerns of the pension scheme trustees.
PN was more interested still to read about the case of a company which had actually “rescued” a pension scheme from the Pension Protection Fund (PPF). This story was reported in the Financial Times (FT) of 12 January. At this point, if you, the reader, are uninterested in knowing anything about pensions law, you can switch off for four lines although be warned that the next four(-ish) lines are relevant to understanding the significance of the phrase “”rescued” a pension scheme from the PPF”.
The PPF is a statutory corporation which was established under the provisions of the Pensions Act 2004. Its main job is to provide compensation to members of eligible (i.e. “eligible” in the opinion of the board of the PPF) occupational pension schemes which provide salary-related benefits where there is a “qualifying insolvency event” in relation to the scheme employer and where the scheme does not have enough money to pay benefits up to a certain level. The PPF was set up, therefore, to help pension scheme members who may otherwise have been left high and dry by their (former) employer’s insolvency.
Until a couple of weeks ago, it was the case that many UK pension schemes which had been in trouble (in the financial sense) ended up being assumed by the PPF which, following an assessment of the scheme, took over their administration, assets and liabilities. The PPF is currently responsible for a number of high profile pension schemes and, as reported last year, could end up being responsible for a few more by the end of next year (including, possibly, the pension scheme which Mr Truell seems to be ready to take on). As stated above, the FT has reported a case in which one company (Liberty House) acquired another company (CovPress) and, in so doing, took that company’s pension scheme out of the PPF. CovPress, a company which produces car parts for several large manufacturers of motor cars, went into administration in October 2016. Liberty House has acquired CovPress and, in doing so, it has acquired that company’s pension scheme. Shortly after CovPress went into insolvent administration, its pension scheme went into an assessment period. During such a period, the PPF assesses whether it will, in fact, formally accept all responsibility for the pension scheme in question. The acquisition of CovPress by Liberty House has resulted in the pension scheme being taken out of PPF assessment and being assumed by the revitalised CovPress once more. This, as the FT confirmed, has never happened before and it may, in PN’s view, have happened in spite of warnings from some (perhaps) well-informed pension commentators rather than because of it.
There have not been many transactions which have resulted in pension schemes being better off as a consequence in so clear-cut a way as the transaction described above. The CovPress transaction is probably different from other events inasmuch as it is one in which the experts were pleased to be wrong. PN is probably not quite an expert but there have been times when he was pleased to be wrong; he was wrong (for instance) to be concerned that he would not receive any jelly babies for Christmas.
Until next time……….