British businesses paying into the Pensions Protection Fund have been handed
a lifeline which will see them avoid paying annual fees of £2bn a year after a
surprise decision by the European Court of Justice.
It was widely believed that the ECJ would demand full compensation for
workers who had paid into final salary schemes before the introduction of the
PPF but the body ruled that the UK government should not be liable.
Paul McGlone, a principal and actuary at leading pensions, benefits group Aon
Consulting said: ‘Companies can breathe a sigh of relief that today’s judgment
did not rule that accrued benefits must be protected in full. Such a ruling
would have led to enormous hikes in future PPF levies, over and above the
increases in levies introduced for 2007/08.’
The ECJ warned that annual levies would have surged to at least £2bn to cover
the cost of full compensation. The case came before the Luxembourg-based court
when 836 former employees of steel producer ASW held the department of work and
pensions liable after their company went into liquidation in 2003, leaving some
staff with only 20% of their entitlements.
UK corporates had been sweating over the decision because the cash injection
required would have been shunted on to employers through the PPF. In the run-up
to the ruling, FTSE 250 heavyweight WH Smith closed its final salary scheme,
dealing a hammer blow to nearly 2,000 of its staff in a bid to address a £41m
shortfall in its pension fund.
Aon stated that if all employers in the UK went insolvent, the PPF would have
to meet £76bn of liability under its current compensation levels, but this would
have rocketed to £440bn if full compensation had to be provided.
The toll on companies will more than double next year to £675m for the fund,
which began operations in 2005 to provide a safety net for employees paying into
final salary pension schemes if their companies went into insolvency.
Currently, the level of compensation is below the full amount of pension
promised in the pension scheme. Those members below retirement age only receive
90% of their pension when they retire and this amount is currently capped at a
pension of £26,050 pa on retirement at age 65. There are also restrictions to
the increases to the level of compensation once in payment, which are only given
in respect of pension earned after 6 April 1997 and these increases are limited
to 2.5% a year.
In reaching its ruling the ECJ panned the inadequacy of the government’s
financial assistance scheme for the fund. An extra £900m of cash would be needed
on top of the £783m already committed to improve the scheme to current PPF
e2v FD racks up £191,000 through selling shares
Finance director of e2v Technologies Mike Hannant has sold a chunk of his shares
in the electronic components firm, making himself £191,000.Hannant sold 50,000
shares at a price of 383p each to leave himself with 454,000 shares;
representing 0.74% of the company. e2v is a leading designer, developer and
manufacturer of specialised components and subsystems for medical, aeronautical
and commercial clients.
The finance chief stepped up to his current role in 1998 before shepherding
the business through a management buyout and a successful float on the London
Stock Exchange in July 2004.
Two weeks ago, the booming business won a E14.4m (£9.5m) contract to supply
electronic tubes to a leading European power supply manufacturer.
Citigroup searching for CFO with CEO potential
Citigroup CEO Charles Prince has ordered the hunt for a new CFO with the
potential to assume the CEO’s mantle at the group. Rica’s largest bank announced
current CFO Sallie Krawcheck, one of Wall Street’s most powerful women, was
returning to her old job as head of wealth management. She replaces Todd
Thomson, who is leaving to pursue other interests.Other possible contenders for
the CEO’s throne included Krawcheck and Ajay Banga, head of international
consumer business. The co-presidents of the corporate and investment bank,
Michael Klein and Thomas Maheras, were also named as potential successors.The
company believed that there was not a pressing need for a CEO replacement as
current incumbent Prince, 56, is expected to remain in the role for a number of
Kazakhmys CFO promoted to chief exec
Oleg Novachuk has been promoted from CFO to chief executive at copper mining
businesses Kazakhmys. Novachuk takes on the role in March following completion
of the company’s 2006 year-end close. Financial controller and company secretary
Matthew Hird will succeed Novachuk as CFO. The move is an about-turn for the
company, which had originally caused controversy by lining up chairman Vladimir
Kim to take on the chief exec role as well.
Law firm pays millions to Enron’s estate
A law firm in Texas is to pay Enron’s estate $18.5m (£9.4m) in settlement over
potential malpractice claims pertaining to legal advice the firm allegedly
offered the company over asset transactions. The settlement follows a report by
a court-appointed bankruptcy examiner, which stated that the firm may have
committed malpractice in approving 28 transactions that involved asset
transactions, alleged to have been disguised as sales. The classification of the
transactions in such a manner could have allowed Enron to falsely boost its cash
flow. The firm, Andrews Kurth, denied any culpability regarding the advice it
gave Enron. ‘We have continuously denied wrongdoing and culpability with respect
to our work for Enron,’ managing partner Howard Ayres said in a statement.
‘We felt, though, after the passage of five years, that it was expedient to
enter into the settlement to put this matter behind us,’ he added.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements