Taxpayers top up pension schemes

Group Business Correspondent

Saturday 22 September 2012

TAXPAYERS and pension schemes are topping up the retirement incomes of more than 1000 former employees of Scottish carpet firms, which collapsed leaving others facing hefty bills.

WEAVING DAY: A worker at Stoddard International, which collapsed in 2005 as the fashion for wooden floors grew. MOTHERWELL BRIDGE: Went into receivership.

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MARK WILLIAMSON

The payments are going to members of the schemes operated by Stoddard International and Richards group, mainstays of the once flourishing carpet manufacturing industry in Scotland.

Members of the two companies' pension schemes receive payments of around £3 million annually. They are getting support under programmes for people offered guaranteed pensions by schemes operated by firms that went bust. The compensation programmes are funded by the Government and levies on pension schemes.

The size of the payments highlights the scale of the problems that can be caused for others when companies that operate big pension schemes offering defined benefits are unable to finance them fully.The importance of the issue in Scotland was underlined last month when Dawson International plunged into administration after being unable to plug the £129m deficit on its final salary pension scheme. Dawson's scheme has around 3320 members but only 56 were active when administrators from KPMG were appointed to the 140-year-old business.Official figures this week showed the number of private sector workers paying into private sector defined benefit schemes in the UK has more than hal millionm last year.The Dawson International scheme is likely to transfer to the Pension Protection Fund, meaning members who have yet to retire will face cuts of at least 10% in the pensions they receive.When Dawson fell into administration PPF's executive director for financial risk, Martin Clarke, said: "We will be working with administrators to make sure the interests of Dawson pension scheme members are best represented."The fund will continue paying in full the pensions of scheme members who have already retired when a company becomes insolvent. It pays up to 90% of the pensions of deferred members.The problems resulting from such under-funded pension schemes are spiralling in Scotland. The country was well represented in industrial sectors hit hard by the process of economic change.This has resulted in many firms in industries like carpet and textile production failing. Some employed thousands of people who belonged to final salary pension schemes. The PPF said 15,601 people belong to pension schemes operated by Scottish companies which have transferred to the fund. Five schemes formerly operated by St Andrews-based Curtis Fine Papers transferred to the fund in March.An unspecified number of people belong to schemes supported by the Financial Assistance Scheme, which pre-dated the PPF.Some 263 members of the scheme operated by the old Motherwell Bridge engineering business are receiving FAS assistance. A further 1686 deferred members may receive help in future.Creditors including Royal Bank of Scotland and Bank of Scotland put Motherwell Bridge into receivership in 2003.Some operations were acquired by a new business that did not take on some historic liabilities including the group pension plan.With operations in Renfrewshire and Ayrshire, Stoddard International collapsed in 2005 after the fashion for wooden floors hit demand for carpets.Almost 1000 members of its scheme are receiving an average of around £2800 assistance annually from the PPF. The fund has been paying a total of £2,760,288 to scheme members annually. There are 553 deferred members.Aberdeen-based Richards employed more than 3000 people in its heyday. Richards went into receivership in 2002 after struggling to fund its final salary pension scheme. The Financial Assistance Scheme is currently topping up the pensions of 197 members of the Richards scheme. It has paid £425,270 to these to date. There are 659 deferred members.

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Taxpayers top up pension schemes

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