TPR to end regulatory action against Coats Group as settlement is confirmed

Written by Natalie Tuck

The Pensions Regulator is to end regulatory action against the Coats Group following the news that it has confirmed a £225m settlement with the trustees of its pension schemes.

The thread manufacturer, formerly the Guinness Peat Group, has been involved in a long running dispute with the regulator over its pension schemes. In December 2013, the regulator issued warning notices against two of the company’s legacy schemes (Brunel and Staveley) setting out the case for exercising its Financial Support Director (FSD) power and issued a warning notice against the UK Coats Pension Plan in December 2014.

Since 2013, the parties have been in a legal process set out by regulations governing TPR’s procedures.

However in February 2016, Coats initiated settlement discussions with three sets of trustees and committed to retain the entire parent group cash balance within the Group to support the schemes. This cash balance is the net proceeds generated from Guinness Peat Group’s asset realisation programme, from 2011-2013, when it sold its share in approximately 50 businesses leaving Coats as the only remaining operating business.

Following on from this, on 16 December 2016, Coats Group agreed to pay a £225m settlement to the UK Coats Pension Plan and the Brunel Holdings Pension Scheme as a result of the anti-avoidance action taken by TPR, which it has today confirmed is now binding. It will safeguard the benefits of approximately 24,000 pension scheme members.

Completion is expected in early March 2017, which is when the regulator is expected to end regulatory action against the company. Coats Group said it has received written assurances from the regulator stating that on completion of the settlement, its regulatory action will automatically cease in relation to these two schemes under the warning notices issued in 2013 and 2014.

This was also confirmed in a release issued by the regulator in December 2016. At the time, TPR executive director for frontline regulation Nicola Parish said it was a “substantial settlement” for the FSD case where neither the employers nor the targets were insolvent.

“This case is a great example of how even after warning notices 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. In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes,” she added.

A comparable offer has been made to the trustees of the third scheme – Staveley Industries Retirement Benefits Scheme trustees and discussions are ongoing.

A spokesperson for the regulator said: “We are pleased that the settlement process is progressing well and should be completed in the next few weeks.”

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