Pay-up order for deficits hailed as a victory for pension holders

Feb 12 2008 by Vicky Anderson, Liverpool Daily Post

A LIVERPOOL pensions lawyer has hailed a clamp-down on the foreign owners of UK companies, making it harder for them to walk away from pension obligations to British employees.

Ben Miller, a partner at DLA Piper, says a case involving the troubled Sea Containers group reached a decisive phase last week when the Bermuda-based company withdrew its appeal against an order from the UK Pensions Regulator.

The regulator had instruc-ted the company to contribute £91m into the two pension schemes of its UK subsidiary Sea Containers Services Limited, effectively stopping the company winding them up while they are still in deficit.

The case represents the first time the Pensions Regulator has flexed its muscles towards a parent company and internationally, and the failure of the appeal is seen as highly significant. “The immediate effect is that the regulator has provided additional protection for the pensions of some 1,300 employees who belong to the UK schemes,” said Mr Miller. “This protection hasn’t been there in the past and companies have been able to distance themselves where a UK subsidiary ran into financial trouble with a pension scheme with a significant deficit.”

Mr Miller says the action will also have wider implications, changing the perception that the regulator will not use his powers.