Whilst walking my
dogs one Sunday night listening to Radio 4, I had a strange serendipitous
moment. The Radio 4 program was File on Four, a very good investigatory program. The presenter was taking about a piece of derelict
waste land in Worcester, the site of a former garment factory, just as I was
walking past that exact location. I had always thought this
factory was just another victim of the recession. The radio program soon brought
to light that the truth was far more devious than that.
Eight months ago the Worcester-based company, Faithful
Workwear, which
was owned by former Tory cabinet minister Stephen Dorrell MP and made
industrial
clothing, went into so-called "pre-pack administration." The assets
were sold
to a new business trading under a new name but without the pension
liability
of the old business.
Now instead of the firm’s pensioners living a well earned
retirement,
after contributing for years to a pension fund, they are set to lose
30 to 40% of
their pension and are relying now on the State’s Pension Protection Fund (PPF). The PPF
was set up, following the scandal whereby Robert Maxwell ripped off all the Mirror Group pensioners
& employees, with the aim of ensuring that pensioners are now not left high and dry if their
former employers go bust.
But now this lifeboat is being used by dodgy employers to
throw overboard company pensioners.
In the case of Faithful Workwear, Mr Dorrell sold off the land for housing and just took the money, instead of putting it into the pension pot as he had
promised. He used that sale to buy shares in another business,
enough to give him a directorship and an annual salary of £200,000 on top of
his MP’s salary. It is OK for him but 300 pensioners are now in limbo, not
knowing what their pensions will be in the future.
Pre-pack is so easily arranged that you can in a single day effectively
remove a company’s assets and leave the pension scheme out on a limb. Pre-pack
administrations are being used to dump costly pension fund liabilities. Under
pre-pack adminstration the company’s assets are sold immediately after it has
entered administration and often the previous directors or
management then buy the assets from the administrator to set up a new company,
asset stripping the profitable sections of the business and using the PPF scheme to look after anyone left high and dry by the shipwrecked company pension scheme..
180,000 people are waiting for their scheme to be accepted into the
fund, but the fund is financed by a levy on live company pension schemes. This pool is shrinking as more of these company pensions schemes go belly up, meaning more public funds will be called on to make up the shortfall and keep the PPF going. The estimate currently is that the fund has a £1.2bn
deficit. Fears that the fund might itself become insolvent are being raised, especially as it could be as a soft option in any future public sector cuts.
Rather than allow a system that dumps pensioners into proverty, it is
the likes of Stephen Dorrell and his exploiting cronies who should be dumped
in the rubbish bin of history.
