Publishing company Reader’s Digest has gone into administration in the UK after The Pensions Regulator (TPR)vetoed an agreement to settle its longstanding pension scheme liability.
The decision came after the Pensions Regulator decided not to support an agreement already reached between the US parent company Reader’s Digest Association (RDA), the trustees of its pension plan and the Pension Protection Fund (PPF) to settle a longstanding pension plan liability.
At the centre of the dispute was the question of how to pay down a £125m deficit in the RDA’s UK pension fund. The failed deal, which would have contained a lump sum payment into the pension fund by the US parent company and an equity stake in RDA for the scheme trustees, would have relieved RDA UK of significant financial obligations associated with its under-funded pension plan.
Approximately 117 employees face losing their jobs.
Peter Murphy, a partner at pensions law firm Sacker and Partners, said: “One can only think the Pensions Regulator considers that the pension scheme is likely to be paid more than what has been offered, either by the trustees proving for a section 75 debt in the UK insolvency of Reader’s Digest Association or through the use of its own anti-avoidance powers against related entities.
“Whatever the case, it is now clear, if it was ever in doubt, that the Pensions Regulator has a mind of its own and will not simply act as a rubber stamp following agreements in principle made by either pension scheme trustees or the Pension Protection Fund.”
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