TPR reaches final settlement in Coats anti-avoidance case
Monday 26 June 2017
Amount recovered by TPR in the Coats case now £329m and overall for DB schemes through direct use of anti-avoidance powers well over £1bn
The Pensions Regulator (TPR) has agreed a £74 million settlement for a third defined benefit (DB) pension scheme as part of its anti-avoidance investigation into thread manufacturer Coats Group Plc (Coats).
In a report published today (PDF, 91kb, 8 pages) TPR outlines its anti-avoidance action against Coats, which has led to a very positive outcome for more than 30,000 members.
In December, TPR announced its action had resulted in payment of £255 million from Coats, helping to safeguard the benefits of approximately 27,000 pension scheme members in the Coats Pension Plan (CPP) and the Brunel Holdings Pension Scheme (BHPS).
Today’s report highlights a settlement for the third and final scheme in the investigation, the Staveley Industries Retirement Benefits Scheme (SIRBS), with 3,700 members and an estimated ongoing deficit of £85 million.
Coats and the trustee for SIRBS have reached an agreement based on the September 2016 settlement offer which will include an upfront payment of £74 million into the scheme, a change in the statutory employer to Coats Limited and a full (buy-out) guarantee from Coats covering the liabilities of SIRBS.
In light of this agreement TPR has agreed to cease regulatory action.
Overall, the settlements in the Coats and BHS cases have meant that the amount TPR has recovered for DB schemes using its anti-avoidance powers now exceeds £1 billion.
Executive Director of Frontline Regulation Nicola Parish said: “The use of our powers in this case has led to an extremely positive outcome for pension savers and the group.
“The ongoing trading operations of Coats have improved and are sufficient to provide ongoing funding for the schemes. This is an excellent result for scheme members, bringing greater certainty that future benefits will be paid in full.
“Today’s report shows that even though our concerns about the funding of the schemes were enough to launch anti-avoidance action and issue Warning Notices, we maintained a strong working relationship with Coats and the trustee, allowing us to be flexible and achieve a fair resolution.
“We will not hesitate to use our Financial Support Direction powers where we see member benefits put at risk, even where the sponsoring employer is solvent.”
In 2013 and 2014, TPR issued Warning Notices setting out the case for exercising its Financial Support Direction power in relation to three DB schemes sponsored by companies within the Coats corporate group.
Pending the outcome of TPR’s case, Coats agreed to suspend intended payments to shareholders of the proceeds from the sale of its former investments.
- Coats Group plc (Coats) – formerly known as Guinness Peat Group plc – is the ultimate parent company of Coats plc. Coats is one of the world’s largest manufacturers and distributors of sewing threads. There are three DB schemes sponsored by entities within the Coats group and today’s announcement relates to the Staveley Industries Retirement Benefits Scheme (SIRBS) which has approximately 3,700 members and as at 31 December 2013 had an estimated deficit of just under £85 million on a scheme specific funding basis.
- Our anti-avoidance case work has recovered more than £1 billion for DB schemes through the direct use of our anti-avoidance powers and subsequent settlements. This is in addition to our ongoing engagement with pension trustees, sponsoring employers, and the wider pensions industry which is helping to secure billions of pounds in deficit recovery contributions each year.
- TPR is the regulator of work-based pension schemes in the UK. Our statutory objectives are: to protect members’ benefits; to reduce the risk of calls on the Pension Protection Fund (PPF); to promote, and to improve understanding of, the good administration of work-based pension schemes; to maximise employer compliance with automatic enrolment duties; and to minimise any adverse impact on the sustainable growth of an employer (in relation to the exercise of TPR’s functions under Part 3 of the Pensions Act 2004 only).
Matt Adams 01273 662086