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Administration October 7, 2006
UK Pension Protection Fund To Absorb £150M T&N Pension Shortfall
July 10, 2006 (PLANSPONSOR.com) - The UK's Pension
Protection Fund will absorb car manufacturer T&N's
40,000-person pension scheme for an estimated cost of £150
million, which amounts to the pension insurer's biggest
bailout so far.
Reported by Adrien Martin
When the manufacturer collapsed five years ago, the cost of the plan was expected to be between £800 million and £1billion, the Financial Times reported.
The terms of the arrangement, which have yet to be approved, include a cash payment of £255 million from the bondholders, who will then own Federal Mogul, T&N’s US parent company. But even after the payment, the plan will be left £150 million in the hole – an amount the PPF has agreed to take.
According to the Times, as of March 31, the assets of the car manufacturer’s pension scheme came in at about £975 million, which included the assets regained from its bondholders. However, without the intervention of the pension insurer, T&N’s scheme would have needed about £800 million to purchase the insurance needed to buy out all of the benefits it promised its pensioners.
The Times reported that pensioners will still face a sharp cut in their pension benefits because the full buyout cost of the scheme would have been about £1.8 billion, which leaves a sizable difference between what the PPF will actually offer them.