UK pensions watchdog defends separating Polestar from scheme

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UK - Polestar’s underfunded pension scheme would have been forcibly wound up had trustees not volunteered the course of action, the UK Pensions Regulator (TPR) has said.

The regulator’s handling of the situation had been heavily criticised in the national press over the weekend, with commentators attacking the creation of a “zombie” scheme - allowing the sponsor to sever financial ties, with only the commitment to pay £45m (€52.5m) toward its deficit over 12 years.

However, in a report on its handling of the situation, TPR defended its actions, arguing that, at the time, agreeing to separate Polestar Group from the scheme and settling on a £45m payment seemed preferable to the publishing company’s insolvency.

A spokesman for TPR defended the decision, saying that while it was “very rare” for it to be the best option to separate the link between scheme and sponsor, on occasion, it could deliver a “materially better position” for the fund.

Its executive director for defined benefit regulation Stephen Soper added that the decision to wind up the scheme was the right one, with the report saying that TPR had planned to “exercise its own power” to wind up schemes had trustees not come to the decision themselves.

The  £45m agreement - between Polestar UK Print (PUPL) and the remaining sole sponsor of the scheme Print Pensions (PPL) - was endangered when PUPL encountered financial difficulties in early 2011.

The regulator said: “In the first quarter of 2011, this reached crisis point, and the main unsecured creditors were given a choice: creditors could accept a small part of the money owed to them in full and final settlement of their claims (which would allow PUPL to be sold to new owners and continue trading) or PUPL would enter administration, in which case unsecured creditors would receive nothing at all.”

Following a final £3.6m payment to the scheme, TPR and trustees agreed on a 40-year recovery plan requiring a “substantial degree of investment outperformance to be delivered over that period,” the regulator said.

However, four months later, TPR concluded that full funding over “any reasonable period” could not be achieved.

Addressing the decision to wind up the Polestar fund and bring out its entry into the Pension Protection Fund (PPF), the report added: “The regulator believes the trustee has acted in a responsible manner in this regard, protecting the interests of the generality of the membership and limiting the PPF’s liabilities.”

At the end of March last year, Polestar Pension scheme reported a buyout deficit of £529m - a figure expected to have risen on the back of weak investment returns and low gilt yields.

A PPF spokeswoman told IPE yesterday that no insolvency event notice had been received from the scheme and declined to comment further.

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