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TPR blocks company dividend over pension deficit

Guinness Peat Group is being prevented from paying shareholders a dividend until it reaches an agreement with The Pensions Regulator over deficits at three defined benefit pension schemes.

The group has locked horns with the regulator over how it funds the schemes it sponsors, which have a combined deficit of £237m, the BBC reports.

GPG has cash reserves of £369m which it wants to hand to shareholders but has been in dispute with TPR for nearly two years.

TPR has now issued a warning notice saying GPG needs to put more cash into the Coats textile company scheme, which carries the bulk of the pension liabilities with a £148m deficit and 27,000 members.

GPG chairman Mike Clasper says his board will continue to fight the regulator over the suitability of the trustees’ recovery plan for the schemes.

He says: “As previously indicated the board, having taken external advice, submitted calculations to the pensions regulator which showed that all the sponsoring companies for the Coats plan were sufficiently resourced as at the relevant date.

“It is therefore extremely disappointing to receive the warning notice in relation to a scheme for which a recovery plan was agreed with the trustees in 2013.”

TPR has already issued warning notices over the Brunel and Staveley schemes, also sponsored by the company. The regulator’s determination panel will consider these cases in 2015. If GPG is unsuccessful in overturning the latest warning notice, the panel will make a determination on how the Coats scheme should be funded.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. This finally confirms that the world (or at least the UK) has gone stark staring mad.

    We have a situation here where the owners of the business are not being paid in preference to a benefit (note NOT salary) of the employees.

    Is it any wonder that final salary schemes in the private sector are all but dead. This firm owns such famous UK firms such as Coates and it also has an aviation arm. Who would now want to invest in this firm? Bear in mind that in essence it is a New Zealand company – who would blame the directors if they just shut it and made the employees redundant and then started up elsewhere? Then the TPR could be really proud of itself. It protected the pension, but trashed the jobs.

    It rather reinforces my policy of not investing in firms if they have a final salary pension. (with certain careful exceptions).

  2. I can’t agree there Harry. As Directors they will have been fully aware of the pensions liability. It is a debt and they need to pay their dues.

    Would it be acceptable for a company to pay dividends but not pay its suppliers?

    What about if you lent someone some money and instead of paying you it back they booked a nice 5 Star holiday somewhere? Meanwhile you were having a week at Pontins!

    It’s the same principal. Their cash reserves are more than adequate,

    What’s to stop them paying the dividend and still closing the company down? Only now they would have the money and not the business and the pension scheme would still be goosed.

    I don’t disagree on Final Salary Schemes but hey ho, the world is a different place these days.

  3. @Harry – For once I disagree with you. I agree with Phil S. However there is an issue here that it appears from the article to be a dispute between TPR and the Pension Trustees as to adequacy and TPR are holding GPG to ransom to agree with them, so there appears to be two sides to this argument and without looking at it in detail, it is difficult to know who is legally or morally correct (and these may be different of course)

  4. Phil I do see where you are coming from, but as you say it is now a different world. A pension is definitely a ‘perk’ nowadays and not deferred income. Everybody expects competitive pay, first and foremost.

    As to not paying suppliers, well the share price might well suffer, but I do take the point. Michael Heseltine built an empire on shafting his suppliers – as did Tesco, Marks and Spencer’s and heaven knows how many others. Nowadays some are a little better behaved, but as you have seen in the press Tesco got into the mire for precisely this reason. Ergo – their share price tanked and the owners (i.e. the Shareholders) are not best pleased and Tesco is now trying to behave in a somewhat better way.

    Shareholder power, when exercised is a mighty force. If a firm closes and starts elsewhere it doesn’t always mean that shareholders have to lose out.

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