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Impact Investing

IPE special report May 2018

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UK roundup: Guinness Peat, Coats, TPR, East Sussex Schroders Property

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  • UK roundup: Guinness Peat, Coats, TPR, East Sussex Schroders Property

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UK – Textile manufacturer Coats is awaiting approval to double contributions to its pension plan in an effort to fund a £100m (€116m) deficit, its parent company has said.

According to the 2013 half-yearly accounts for Guinness Peat Group (GPG), an agreement had been reached in principle following the 2012 valuation for the Coats UK Pension Plan, which has seen its deficit fall by £61m to £100m in the six months to 30 June.

The agreement stipulated that the Coats fund would see annual contributions rise to £14m, a doubling over previous levels, to solve the underfunding.

The holding company saw the pension deficits in its two other pension funds, Brunel and Staveley, fall by £9m and £7m, respectively, with both schemes now reporting shortfalls of £29m.

However, GPG noted that the UK Pensions Regulator (TPR) had recently launched investigations into each of the three pension funds and was considering whether to impose financial support directions (FSDs) or contribution notices on the company.

It acknowledged the "element of uncertainty" introduced by TPR's proceedings as it transitioned from being an investment company to one focused on textile production.

"There is very little precedent indicating what 'reasonableness' means in the FSD context," it further noted.

FSDs were recently the subject of a Supreme Court ruling that found they ranked alongside claims from unsecured creditors in the case of a company's insolvency.

The company added that a contribution notice was only imposed in instances where there was evidence of a "deliberate omission […] that had caused, in broad terms, material detriment to the likelihood of members receiving their accrued benefits".

GPG said it was speaking with all involved parties about the regulator's investigation and waiting for approval from TPR for its plan to double contributions for the Coats scheme.

In other news, the £2bn local authority pension scheme for East Sussex County Council has increased its property exposure through a follow-on investment with Schroders.

The fund has invested a further £24.5m with Schroder Property's multi-manager team, a mandate the company has held since 2010.

It invests across a range of core and sector-specialist funds on behalf of the local authority scheme.

In its 2011-12 annual report, East Sussex noted that Schroders was its only real estate manager, but that the fund-of-fund approach provided it with the required diversification.

As of the end of March 2012, Schroders managed £194m of money on behalf of East Sussex, accounting for 9.4% of the pension fund's overall assets under management.

It reported annual investment income of £5.2m from its pooled property investments over the same period.

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