The Pensions Regulator has issued a contribution notice to an individual in relation to the Carrington Wire pension scheme, but experts warn the amounts recouped will not match the benefits previously promised to members.
The regulator had been pursuing two companies for failing to honour a guarantee given to the Carrington Wire Pension Scheme when its sponsoring employer was acquired, leaving the scheme with a large liability and limited options to address it.
In January, the regulator reached an £8.5m settlement with two companies involved in the case, PAO Severstal and OAO Severstal-Metiz.
A subsidiary of Russian steel and mining company PAO Severstal acquired Carrington Wire Ltd in 2006. As part of the acquisition Severstal agreed to provide the pension scheme with a guarantee covering all payments. However, it also negotiated a clause that the guarantee would fall away if Severstal ceased to be associated with CWL.
CWL was later wound down to the point where it had no ongoing business and one material asset, but still had a large liability to the scheme.
It was then sold to Mr Richard Williams for £1 in 2010, meaning the scheme lost its guarantee from Severstal and became reliant on CWL. The company liquidated and the scheme entered the Pension Protection Fund in December 2012.
Even with recovery of the £382k under this notice the total amount obtained by [the regulator] is far less than the deficit
Ian Neale, Aries Insight
The regulator issued a warning notice on November 30 2012 seeking to impose contribution notices – which require the recipient to pay any amount up to the total statutory debt – of £17.7m against the two companies.
They settled with the regulator for £8.5m in January this year, shortly before a hearing was due on the case.
A separate hearing in relation to Williams took place on March 11. Following the hearing, the regulator’s determinations panel decided to issue a contribution notice to Williams for £382,136.
Enforcement
“The really positive thing is [the regulator] are showing that they’re prepared to exercise their powers in an appropriate [way],” said James Bingham, partner at law firm Sackers.
“It’s warranted that they go after this individual who has benefited at the expense of members.”
Claire Carroll, partner at law firm Eversheds, said the announcement “solves the mystery of who had been the subject of the third Carrington Wire contribution notice”.
She noted the regulator had been criticised for the £8.5m settlement, far below the £17.7m originally sought from the companies, but added: “The decision to pursue Mr Williams may not have elicited much more money for the scheme, but it should provide members with some satisfaction that Mr Williams has not been allowed to retain the monies that he was paid by the Russian group.”
Ian Neale, director at pensions technical specialists Aries Insight, said the action showed the regulator was willing to take punitive action where necessary.
He said: “The determination to issue a contribution notice against the third target, in effect to obtain the amount by which he had personally benefited, shows that if the tests are met [the regulator] will not be deterred by argument that enforcement would bankrupt the target or that the cost of enforcement would be disproportionate.”
However, he added: “Even with recovery of the £382k under this notice the total amount obtained by [the regulator] is far less than the deficit.”
