Maersk pension U-turn met with delight
UK – Shipping company Maersk has announced it has decided to meet the full deficit of the Sea-Land Services pension plan in a move which represents a dramatic U-turn.
The decision has been met with delight by the head of the Pensions Advisory Service.
The case of Maersk, and the wind-up of the Sea-Land Services pension plan, has been one of the major pensions stories of the last 18 months. Maersk inherited Sea-Land in 1999 as part of a global acquisition, simultaneously inheriting its one million-pound (1.45 million-euro) deficit on full buy-out value regarding the pension plan.
Falling equity markets increased the deficit further to five million pounds (7.24 million euros), and the decision was taken to wind-up the scheme at the end of May last year. As the scheme, however, met the legal minimum funding requirements, Maersk was entitled to abandon the scheme, leaving some members with a 60% shortfall in their pensions.
The case highlighted the flaws of the UK pensions system, and is believed to have triggered the occupational pensions reform passed this year which now forces employers to ensure employees receive their full entitlements in light of a scheme wind-up.
After over 12 months of insisting that it would only fulfil its legal obligations, the company announced yesterday that it will now “meet the full deficit...thus ensuring that all members will receive their accrued pension entitlements in full”, at a cost of between 4.5 and five million pounds.
Maersk says the reason is that it is “the right thing to do”. The decision “takes account of the spirit and intention of the proposed new measures by the pensions_reform”. The company insists the decision was made on a “voluntary basis”.
Malcolm McClean, chief executive of OPAS, the pensions advisory service, said that they were “delighted, that Maersk has now done the decent thing and will meet the pension promise that the scheme made in full”.
He added that while Maersk had been legally correct in fulfilling only the minimum funding requirement, it had been an issue of “morals” given the size of the company compared to the relatively small scheme affected.
“Let’s hope it sets an example to other employers which are winding up their schemes,” added McClean.