UK – UK Coal has agreed a restructuring of its business that will allow for its underfunded defined benefit (DB) scheme to enter the Pension Protection Fund, with the lifeboat scheme set to receive payments from the restructured company.
The announcement comes just months after it was revealed that the UK Pensions Regulator had blocked the entry of the Industry-Wide Mineworkers’ Pension Scheme (IWMPS) and the Industry-Wide Coal Staff Superannuation Scheme (IWCSSS) into the PPF for not being an “appropriate or reasonable” action for addressing its £550m (€642m) deficit.
The schemes instead bought a controlling stake in a property company formed after a restructuring.
However, a further restructuring became necessary after a fire in March led to the closure of one of the company’s mines, leading to UK Coal Mine Holding and UK Coal Operations today entering administration.
In a statement, UK coal said: “The administrators have separated out the viable operations of the group and agreed a compromise with major creditors, including the Industry Wide Pension Funds, which will see the pension schemes transfer to the Pension Protection Fund in due course.”
Martin Clarke, the PPF’s executive director of financial risk, meanwhile said the fund was pleased to have cooperated on the “innovative plan” that would see it take an interest in the restructured UK Coal in the form of debt instruments.
“It became clear to everyone involved very quickly that, whatever the future held for UK Coal, its pension scheme would come into the PPF because of the size of its deficit,” he said.
Clarke noted that the decision to take on the schemes now would protect the benefits of around 7,000 members of the legacy funds.
“The agreement also means we will receive regular payments from the company, which we expect to produce a higher return in the long run than if the company had simply been allowed to collapse into insolvency,” he said.
“This is good news both for our members and our levy payers.”
The restructuring, which UK Coal said would secure 2,000 jobs, will result in UK Coal Mining Holdings Limited becoming the company’s new parent.
The PPF will continue to receive payments from the new company, which the fund insisted would be “materially higher” than any monies it would have been due upon insolvency.
There had previously been speculation as to whether the PPF would be able to accommodate the two legacy schemes, the biggest funds it has taken on to date.