Pension watchdog scrutinises pre-pack administrations

ADMINISTRATIONS where pension liabilities are dropped are currently being investigated by the Pensions Regulator.

A particular emphasis has been placed on pre-pack administrations where pension liabiltiles are ditched when the business is sold, The Telegraph reports.

In these types of administration a company is marketed prior to an insolvency and sold immediately on entering into the process.

Two recent insolvencies to be examined include mattress maker Silentnight and carpet business Brintons.

Bill Galvin, CEO of the pensions watchdog, told the publication: "We are investigating a series of transactions.

"There is Brintons and Silentnight, but also other cases that are not public."

In the Brintons case, private equity business Caryle bought the company out of administration for £40m without the pre-existing pension scheme.

Many industry figures have said pension liabilities have become too large and volatile for companies to cope. Some have suggested older companies with past obligations are now struggling and in future will either separate the liabilities or have to fold.

Galvin said: "We are sympathetic, if companies come to us and say, look we don't have the cash at the moment, but why don't we use these assets instead? Or if they would like to back-end load some of their pension scheme payments, then we would listen."

In a recent case against Lehman Brothers and Nortel, the court gave the regulator powers to force administrators to pay pension liabilities ahead of all other payments in certain insolvencies.