By Ilonka Oudenampsen
The Pension Protection Fund has responded to Dawson International’s allegations that it refused to take on the company’s pension scheme to prevent it from going into administration.
The cashmere business yesterday went into administration, after it previously emerged that the firm had to contribute to its huge pension deficit of around £50m, despite the company being worth just £700,000 at the time.
Currently only about 60 active members contribute to the scheme. According to Dawson’s group finance director the firm has been making £400,000 a year in regular contributions but has been paying an additional £1m annually just to keep the scheme running, a figure which he called unsustainable.
Dawson tried to negotiate a deal with the PPF, where the fund would receive a 33 per cent stake in the company in return for covering the pension burden, but the PPF rejected the deal.
In a statement, PPF executive director for financial risk Martin Clarke emphasised that the PPF exists to protect pensions in the event of company insolvency and inadequate pension scheme funding.
“On rare occasions, we will - alongside the Pensions Regulator – consider transactions which allow a company to continue to operate with the pension scheme being taken on by the PPF,” he said.
“We do not enter such arrangements lightly and only agree them if a number of stringent tests are met. Unfortunately, in this case the offers made to take on the pension scheme, given the size of the deficit in the scheme, were inadequate.
“In all cases, we apply clear and consistent principles, taking into account the likely impact they may have on pension scheme members as well as the cost to the other pension schemes which pay our levy.”
He added that the PPF will be working with the administrators to make sure the interests of the Dawson pension scheme members are best represented.