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Sandler to decide fate of Northern Rock pension scheme

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  • Sandler to decide fate of Northern Rock pension scheme

UK - The future of the Northern Rock pension scheme will depend on the new management team of the nationalised bank, HM Treasury has confirmed.

Alistair Darling, chancellor of the exchequer, will today present legislation to bring beleaguered banking group Northern Rock under "temporary public ownership" after the government decided both private sector proposals - from the Virgin consortium and the Northern Rock management team - did not provide "value for money for the taxpayer".

Northern Rock shares were suspended from trading this morning in preparation for the Bill, scheduled to be presented to Parliament this afternoon at 3.30pm, which will allow the government to acquire the bank's shares and assets, although Darling claimed compensation would be provided to shareholders at a level "to be determined by an independent valuer".

He emphasised the bank would be eventually transferred back into the private sector "as soon as it is right to do so", as the Bill includes a 12-month limit, and stated Northern Rock would continue to be run on a commercial basis under a new management team "at arms length from the government".

Ron Sandler - former chief executive of Lloyds of London and known in the UK for a damning review in 2002 of retail financial savings products which proposed the introduction of 'low-cost savings' vehicles - will take on the £90,000 (€120,000) a month role of executive chairman, while Ann Godbehere, former financial officer at Swiss Re, will become the bank's chief financial officer on a monthly salary of £75,000.

However, the government has failed to provide any guarantees to the Northern Rock pension scheme, despite repeated requests from scheme trustees. (See earlier IPE.com story: Trustees await Northern Rock guarantee)

In January, trustees asked the Northern Rock board, HM Treasury, the Bank of England and the Financial Services Authority (FSA), to either make the scheme a secured creditor or to provide a similar guarantee to the one provided for savers and depositors, as updated valuations had revealed a £100m (€133m) deficit.

But the government has failed to meet the request, and has now passed responsibility for the scheme to the new management team.

A spokesman from HM Treasury claimed nationalising the bank would "have no direct impact on the scheme" as it is a separate entity, and "we're not nationalising the pension scheme".

He added: "Things will continue unchanged for the pension scheme, it will be a question going forward for Ron Sandler and the management team once they've got things in place."

Trustees of the pension scheme said they are now "seeking clarification from the new management team and want a meeting with Sandler and Godbehere to discuss this as soon as possible. We will then be letting members know where they stand".

In addition, the trustees confirmed they "are still seeking a commitment to security for the estimated £100m deficit" because "as far as we are concerned this has not changed".

Trade union Unite also suggested it will increase pressure on the Northern Rock management as it claimed nationalisation will bring "further uncertainty" for employees.

It warned it would be seeking "urgent clarification" over implications to job security and pension arrangements, and Graham Goddard, deputy general secretary, confirmed Unite will be "pressing for solutions that are in the best interests of the employees and the company's future".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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