UK – The UK’s Pension Protection Fund (PPF) is seen as large enough to handle the huge defined benefit schemes of UK Coal, and now seems likely take over the schemes’ £550m (€642m) liabilities whether or not the struggling company keeps operating.
UK Coal, which manages the rump of former state enterprise British Coal, is currently in talks with creditors following the forced closure of a major mine in March.
The combined scheme would be the largest so far to be taken into the PPF.
Chris Kitchen, secretary of the National Union of Mineworkers, said talks were aimed at hiving the company down to leave a viable business, of which the PPF would own 90%.
The two DB pension schemes involved are the industry-wide mineworkers scheme and the industry-wide staff scheme, he said.
“They will both go into the PPF regardless of whether the hive-down happens or not,” Kitchen said, adding that if the company goes out of business, the PPF will end up picking up the pensions deficit and very little else.
Meanwhile, Ros Altmann, former director general of the over-50s insurance company Saga, said concerns about the ability of the PPF to absorb a scheme as large as the coal scheme were overdone.
“The PPF has always assumed it would eventually need to take on some large pension schemes,” she said.
“Its financial forecasts have budgeted for a few large firms to fail, and the fact UK Coal would be the largest to enter PPF should not be a cause for undue alarm.”
The PPF said in its recent three-year plan that it expected to take on as much as £1.4bn of liabilities this year and £1.8bn next year, Altmann said, adding that the rescue fund had the capacity to absorb more.
“Until now,” she said, “the PPF has successfully managed its investments and improved its funding ratio, while also ensuring it manages risks carefully.”
UK Coal’s Daw Mill Colliery in Warwickshire, which had a workforce of 650, caught fire in February, and the loss of the pit will cost the company around £300m.
Kitchen said the outcome of the talks depended on all creditors agreeing to the hive down.
Government ministers from various departments, tax authority HMRC, trade unions and trustees were among the participants in the discussions, he said.
“It’s a bit of a balancing act trying to pull it all together,” he said.
If the company is saved as a business, this would safeguard 2,000 jobs, he said.
The pension schemes are running a combined deficit of £450m on a full buyout basis based on a valuation carried out 8-12 months ago, Kitchen said.
Talks are expected to reach a conclusion in the next 14 days, parties have been told, though Kitchen warned this was the latest of several deadlines already given.
The PPF has given no details about any plans regarding the UK Coal pension schemes, other than confirming its involvement in talks.
A spokesman said: “We’re one of a number of people involved in discussions over the future of the UK Coal pension scheme.
“The priority for us is to make sure we protect the pension scheme members.”
UK Coal has two viable deep mines and six surface mines.
The company went through a restructuring last year, which was completed on 10 December.
This involved the legal separation of the property business and the mining business as part of a bid to keep the company viable following heavy losses over the last four years, a UK Coal spokesman said.