Turkey producer Bernard Matthews has gone into administration, with the pension scheme expected to enter the Pension Protection Fund assessment period, but questions remain as to why the scheme was allowed to fail.
Family office Boparan Private Office bought the company from private equity house Rutland Partners last week through a pre-pack agreement, a form of transaction in which the buyer acquires the business and its assets, but not necessarily its debts and liabilities.
Previous pre-pack deals
Pre-pack administration has sometimes been used as a means of shrugging off pension liabilities, generating controversy back in 2011, following investigations into the buyout of carpet manufacturer Brintons – whose scheme entered the PPF in 2014 – and the pre-pack deal of Silentnight, whose scheme was assessed in 2012 but did not enter the PPF.
This prompted the Pensions Regulator to seek extra powers from the Department for Work and Pensions to prevent sponsors abandoning schemes – but none were granted.
In the case of the Bernard Matthews deal, the pension liability is expected to pass to the PPF.
The PPF said in a statement: “We have been made aware that Bernard Matthews has gone into administration. As a result, we expect that the pension scheme will enter the PPF assessment period, and members can be reassured that we are there to protect them.”
Offer to take on liabilities
A spokesperson for Boparan Private Office said: “Boparan Private Office offered the seller (Rutland Partners) a deal which included all liabilities, including the pension liability.
“However, this offer was rejected and consequently, the business went into administration.”
The spokesperson continued: “Whilst we recognise all liabilities, including the pension liability, is the seller’s responsibility, it should be acknowledged that we have paid a fair market price for the assets, which is materially more than the pension deficit.”
A spokesperson for Rutland Partners declined to comment on why the offer to take on the pension liabilities was rejected, but said the company was pleased all 2,000 jobs at Bernard Matthews had been preserved in the deal.
The deal has been criticised by the chair of the Work and Pensions Committee, Labour MP Frank Field, who told Sky News the regulator needs to “act robustly and quickly” to prevent pension liabilities being left behind in the same way.
A spokesperson for the regulator said: “Where we become aware of a company insolvency, or that one might be imminent, we will consider the circumstances, and if we identify risks to its pension scheme we may decide to investigate whether it is appropriate for us to use our powers to protect members’ interests.”
They added the regulator was aware of the situation at Bernard Matthews and was in contact with the trustees and the PPF, but could not comment further at this stage.
‘Opportunity for lateral thinking’
Alan Pickering, chair of professional trustee company Bestrustees, said trustees should be open-minded in discussions where a sponsor might struggle to meet the liabilities of its scheme.
“At the macro level the UK is on the hook for more defined benefit promises than it can probably honour,” he said.
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“I don’t think there should be blanket easements, because there are trustees, employers and members who have been funding appropriately,” he added, with the caveat that “where it’s apparent past promises can’t be honoured, there is an opportunity for some lateral thinking”.
“If that can take place before there is a corporate casualty, so much the better, because they can probably salvage some of the value.
“You can honour more of the promises than if the scheme fell into the PPF.”
