The members of the plan are receiving money under a government-funded scheme that was set up to help pensioners formerly employed by firms that hit the buffers.
The news that former employees of Motherwell Bridge are having to rely on official help will reignite the controversy surrounding the treatment of what was one of the survivors of Scotland’s Victorian engineering heyday by some of the country’s biggest banks, including Royal Bank of Scotland.
The banks put Motherwell Bridge into receivership in 2003. The decision was taken when Sir Fred Goodwin was leading RBS on what proved to be an ill-judged expansion drive that culminated in the acquisition of ABN Amro in 2007.
Despite making errors that resulted in Royal Bank requiring a massive government bail-out, Goodwin is drawing an annual pension of £342,500.
However, following the action of lenders members of the Motherwell Bridge Group Pension Plan were left facing cuts of around half in the pension savings that many had spent years accumulating.
The problems arose when creditors, also including Bank of Scotland, placed the then loss-making Motherwell Bridge in receivership in September 2003. They were owed around £45m.
Although a former director had proposed a £35m buy-out of the whole group, the lenders favoured a scheme under which better-performing parts of the group were cherry-picked by a new business. This did not have to take on some of the historic liabilities of Motherwell Bridge, including the group pension plan.
The scheme had 2000 members at the time of the receivership but was in deficit by around £11m. It provided pensions based on the final salaries earned by qualifying employees. Trustees agreed to take £2.9m cash and a 24.9% holding in the reconstituted group in exchange for it being relieved of any liabilities connected with the fund.
Following the arrangement members of the scheme qualified for help under the Financial Assistance Scheme. This was created by the government to help people belonging to schemes that were underfunded when they were wound up and the employer was either insolvent or no longer existed.
However, the firm that bought the best bits out of the old Motherwell Bridge group, including the name of that company, prospered.
In September 2006 it was sold to a management buy-out team led by Hugh Hayes and backed by a London-based private equity firm, JO Hambro Capital Management.
Hayes confirmed the buyout would ensure banks would recover the debts due when the holding company was placed in receivership.
Last June control of the firm moved to the middle east after it was bought by the Kuwait Finance House. As the old Motherwell Bridge plan sold its stake in 2006, it made no money from that deal. Last week Hayes said Motherwell Bridge had remained profitable and had continued to meet repayments.
However, the amounts provided by the tax-payer to members of the pension scheme have been increasing as more have reached retirement age. In 2006 the Department for Work and Pensions said 14 members were receiving funds under the Financial Assistance Scheme.
On Friday a spokesperson for the Pension Protection Fund said some 151 members of the Motherwell Bridge plan were receiving assistance.
The fund was unable to say how much had been paid to scheme members in total.
But the disclosure that the tax-payer is having to pick up the bill for the shortfall in a scheme that was wound up following action by well-paid bankers will ensure that the actions of the lenders come underfresh scrutiny.
RBS and Mortherwell Bridge declined to comment.
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