(April 22, 2013) – The UK’s Pensions Regulator has backed a plan to allow Trinity Mirror to slash its contributions by more than a third, as the publisher struggles to get on top of its debts.
Under the deal, Trinity Mirror will pay just £10 million a year into its final salary scheme until 2015, before resuming its annual £33 million payments thereafter.
Money that had previously been earmarked for pension contributions will now be used to pay down the publisher’s debts. The media giant is one of the largest in Europe and publishes titles including….
The move, first reported in the Sunday Times, will increase the pension deficit to £300 million – deficit shortfall which is already creaking under the weight of pension liabilities worth £1.8 billion.
Trinity Mirror’s final salary scheme has been struggling to keep afloat since its former owner, Robert Maxwell, took money out of the scheme in the 1980s.
Today, as a company, Trinity has a market value of just £238 million – which is less than the pension deficit is expected to be at the end of 2014.
Independent pension consultant John Ralfe wrote about the move in the Financial Times when it was first rumoured in March 2013.
To say he was unimpressed by the deal is an understatement.
“Trinity Mirror is trying to drive a coach-and-horses through the regulatory principle that the pension scheme should not be subordinated to other unsecured creditors,” he wrote.
“The regulator has the power to force a company to make contributions – a power not used so far – and it should start the lengthy legal process to ensure the full £100 million pension payments are made, as long as Trinity Mirror’s other unsecured creditors are being paid on schedule.
“The regulator should do this despite the serious implications for the company, its pension scheme members and the Pension Protection Fund. Both sides know that if the company does make the full £100 million deficit contributions it may lead to a default on its borrowings, which may, in turn, lead to administration.”
The Trinity Mirror deal comes at an interesting time for the Pensions Regulator – during the most recent Budget announcement chancellor George Osborne hinted that new regulatory powers would be granted to the watchdog, although the detail on those powers is yet to be revealed.
It is understood however, that the regulator will be encouraged to offer greater consideration to companies’ sustainable growth; a move which some in the pensions world believe could undermine schemes’ ability to secure sponsor funding.
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