RETIRED employees of The Scotsman newspaper will be among the biggest losers from the Johnston Press administration, with Pension Protection Fund (PPF) rules meaning those who built up pots prior to 1997 will no longer see that part of their pension increased by up to five per cent on an annual basis.

Johnston Press was bought out of pre-packed administration last month after struggling to refinance its £220 million debt pile. At the time its pension scheme had a deficit of £305m when valued on a buy-out basis.

As a result of the administration the scheme, which has around 5,000 members, moved into the PPF’s assessment period and is expected to formally enter the industry lifeboat within the next two years.

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This will ensure scheme members who have already retired will continue to receive their current pension while those who are yet to retire will see a reduction to their entitlement of between five and 10%. These members will see their pensions increase in line with inflation each year when in payment, with the PPF paying the lower of CPI or 2.5%.

However, as there was no legal obligation for such increases to apply until April 1997, the PPF does not uprate pensions built up prior to that point, meaning older members of the Johnston Press scheme could miss out on significant amounts of their existing entitlement. Because Johnston Press grew significantly by acquisition from the 1970s onwards, how big an impact this will have depends on which part of the business the pension scheme member was employed in.

A spokeswoman for Bristol-based Open Trustees, which has been responsible for the Johnston Press scheme since the company entered administration, confirmed that “the plan has numerous different benefit structures” for pre-1997 accruals “which relate to different newspaper titles”.

“Some benefit structures provide for no increases, some provide fixed pension increases such as 3% and some provide inflation-linked increases subject to a minimum or maximum cap,” she said.

The terms offered to employees of The Scotsman business, which Johnston Press paid £160m for in 2005, are among the most generous, with former employees up until now receiving annual inflation-linked increases capped at 5%.

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For 70-year-old Martin Hillman, who worked as a sub-editor at The Scotsman between 1979 and 2000, the impact of losing those increases on most of his pension could be significant given that “it is not unreasonable” for him to expect to live for another 20 years.

Although inflation is currently at 2.3% and is expected to sit at around 2% in the next couple of years, an annual pension of £10,000 increased by the maximum 5% each year would grow to over £26,500 during that timeframe. Even at the 2.5% the PPF will pay out on post-1997 accruals, £10,000 would increase to over £16,000 over 20 years.

While the loss of increases is a blow, Mr Hillman said it has been made worse by the fact that the business in which he built up his pension entitlement did not at that time have any connection to Johnston Press.

“A pension is deferred wages, already earned, and now it is being arbitrarily cut by people with whom many pensioners have no connection; I left The Scotsman before Johnston Press took over,” he said.

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Marco Chiappelli, who was finance director at Johnston Press before retiring in 2002 with 20 years’ service, will also now see just a small portion of his pension uprated each year. Although he admitted to being disappointed by the situation older scheme members have found themselves in, Mr Chiappelli said that with all the increases he has received up to now locked in, he is “grateful that my pension is safe”.

“I’m very disappointed but there’s nothing I can do about it,” he said. “I’ve had a good run of the ball because Johnston Press could have gone bust five years ago.”

It is likely that the Pensions Regulator, which has been looking at the circumstances surrounding the Johnston Press administration, will order its new owners to make a significant payment to the PPF in lieu of pension contributions.