The right of workers to their pension payments is threatened by the firms going bankrupt and into administration, which is no doubt has increased recently as a result of a credit crunch.
The clever investors are using pre-pack administration as a tool to able to go into bankruptcy only to then immediately repurchase the most profitable and valuable parts of their operations with the consent of “Secured Creditors”. Business is then transferred to the purchaser without concerning “Unsecured creditors” (Unsecured creditor ) which includes pensioners and their liabilites such as a pension scheme deficit.
For instance, as an unsecured creditor, the Woolworth final salary pension scheme, which is believed to have a deficit of at least £8m, is now expected to log a Section 120 Notice with the Pension Protection Fund (PPF).
The PPF is an insurance fund set up by the government in 2005 to meet the pension bill of insolvent companies. Under the PPF, those employees who have not reached normal pension age, i.e. the vast majority, are only entitled to 90 per cent compensation (Protecting People’s Pensions).
As a result of the PPF rescue, a pensioner can face a cut, an independent consultant estimates, in the pension value by 20 per cent. This is 3 per cent higher than what is contributed by devaluation of stock.
If this discovery was not bad enough, the mismanagement of the pension funds by the administrator including employers has also unfolded recently. The interesting evidence about which will be discussed tomorrow.
Tags: pensions, PPF, Unsecured Creditors
