The UK’s Pensions Regulator (TPR) has reached a settlement with MGR Capital over costs associated with the MG Rover Senior Pension Scheme, nine years after its sponsor’s failure.

TPR said MGR Capital will pay £8m (€10.1m) towards the scheme which leaves Pension Protection Fund (PPF) assessment and will be wound up, securing higher benefit payments for members.

Stephen Soper, interim chief executive of TPR, described the settlement as ”substantial” in the context of the scheme.

The dispute stems from the 2005 insolvency of UK car manufacturer MG Rover, resulting in the thousands of redundancies and two of MG Rover’s pension schemes entering PPF assessment.

The larger pension fund completed its PPF assessment and entered the fund while the Senior fund remained in assessment due to TPR’s investigations.

At the time of liquidation of MG Rover, the UK government ordered a task force to investigate the corporate failure.

The task force reported its findings in 2009. It uncovered the sale of a portfolio of customer loans by Rover to MGR Capital, a joint venture set up by individuals within Rover and a UK bank.

The loan book was sold to MGR Capital in 2001 and resulted in the company holding significant assets of Rover by the time it entered liquidation in 2005.

Given the circumstances around the sale of the customer loans and TPR’s own investigation, it was decided the regulator should seek to issue a financial support direction (FSD) to MGR Capital in order to protect the pension fund from entering the PPF.

In December 2012, TPR issued a warning notice to MGR Capital on the potential use of a FSD.

This was on the basis one the loan book could have been purchased by and for the benefit of Rover, or its subsidiaries, instead of MGR Capital.

After negotiations, MGR Capital settled on the case with an £8m commitment, avoiding the use of an FSD and PPF levy payers funding the scheme’s shortfall.

Soper said: “Our involvement once again demonstrates that the regulator will not hesitate to use its powers to protect the retirement savings of scheme members and limit calls on the PPF.”

TPR recently celebrated victory in the long-running case against bankrupt US bank Lehman Brothers, resulting in a £184m settlement from its subsidiaries.

“It is clear that our warning notice led to productive negotiations with MGR Capital, concluding in a settlement which achieves our joint objectives to act in the best interests of scheme members and the PPF,” Soper added.

Speaking to IPE, TPR’s in-house lawyer, Marcus Laughton said he expected the significance of the Lehmans victory to give the regulator more strength in recovering funding for abandoned pension schemes.