GMB blames private equity for insolvencies
UK - A total of £2bn (€3bn) in pension deficits is to be found in companies linked to private equity owners, the GMB union has alleged.
According to research by the union, 96 insolvent pension funds either in the Assistance Scheme (FAS) or under consideration by the Pensions Protection Fund (PPF) have "direct links to private equity owners".
This includes MG Rover linked to private equity firms Davis Capital and Sovereign Oklahoma Development with a pension deficit of £495m in the FAS and T & N linked to Carl Icahn private equity with a £875m deficit currently checked by the PPF.
"GMB has argued that companies owned by PEFs are far more likely to fail
during an economic downturn," the union stated in a special report.
Private equity will be one of the major topics at the GMB's annual congress in Brighton tomorrow.
These findings come as Boots pension fund trustees are struggling to strike a deal with private equity company Kohlberg Kravis Roberts (KKR) over the deficit in the pharmacy's pension fund.
Their main demand is for a guarantee for the 66,000 members of the pension fund in case Alliance Boots should collapse following the leveraged buy-out (LBO).
KKR is said to have agreed to further negotiations after an announcement by the trustees suggesting it is considering taking the case to court .
At the same time, the Pensions Regulator, who took part in earlier talks, have been criticized for not having enough powers to secure pensions in LBOs.
A spokeswoman for the Regulator told IPE "so far we did not have to use the powers we have been granted" in order to protect pension benefits.
"But we think that the fact that we have these powers helps us to achieve our objectives because companies are taking our powers seriously and they are addressing pensions appropriately," she added.
These powers include the issuing of an improvement notice requiring specific action to be taken within a certain time, a freezing order on scheme assets where wind-up is pending, imposing fines or prosecution of certain offences in the criminal courts.
"The Pensions Regulator has a statutory objective to protect the benefits of scheme members," the government's Department for Work and Pensions (DWP) commented. "This is working well and there is currently no reason to believe that the Regulator's powers are insufficient in leveraged buy out scenarios."