Coats Group agrees £255m settlement with TPR

Coats Group Plc has agreed to issue a £255m payment into its pension schemes as a result of anti-avoidance action taken by The Pensions Regulator to safeguard the benefits of an estimated 24,000 scheme members.

TPR issued warning notices to Coats Group in 2013 and 2014 explaining the case for implementing its Financial Support Direction to three defined benefit schemes sponsored by companies within the Coats corporate group.

The regulator has now agreed upon a settlement with the firm covering the Coats Pension Plan and the Brunel Holdings Pension Scheme, which comprises of approximately 90 per cent of total membership.

Coats Group has agreed with TPR that upfront payments of £255.5m will be made into the two schemes and will ensure that they are left in a similar funding position.

The company also confirmed that it will change the statutory employer for the two schemes to Coats Limited, representing an improvement in the covenant support for the schemes, and a full guarantee from Coats of the liabilities of the two schemes.

Prior to reaching the outcome of TPR’s case, Coats suspended intended payments to shareholders of the proceeds from the sale of its investments.

A similar offer has been made to the trustees of Staveley Industries, the third scheme in the Coats Group.

TPR executive director of frontline regulation Nicola Parish said: “This is a substantial settlement of our FSD case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do.

“This case is a great example of how even after WNs have been served, TPR, the company and the trustees can work together to achieve a good outcome for members without the need to formally enforce our powers through the Determinations Panel. We will continue to take a commercially-minded and pragmatic approach when pursuing the use of our powers to achieve good outcomes for scheme members.

“In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”

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