Maxwell pension shortfall widens: Low interest rates pushing up costs

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The Independent Online
MAXWELL pensioners - who on Thursday will lobby Parliament in an attempt to highlight their worsening predicament - have learnt that the deficit between the assets and the liabilities in the pension funds raided by Robert Maxwell has increased in the past few months by as much as 60 per cent.

The problem has been caused by this year's fall in interest rates, which has dramatically pushed up the cost of replenishing the pension schemes through the traditional method of buying in annuities. Annuities provide the stream of income to pay for pensions, and as interest rates fall the amount of capital needed to provide this income stream increases.

It has meant that in some schemes there is only just enough money to pay current pensioners, with nothing left for people approaching retirement age.

Around 20,000 current or future pensioners are affected. Only past or present employees of Mirror Group Newspapers - who are protected by the group's commitment to replenish its pension funds over 14 years - are not affected.

Accurate figures are not yet available, but it is estimated that the fall in interest rates this year could have pushed up the shortfall by as much as pounds 50m. One pension scheme, the AGB Works Scheme, has seen the gap between its assets and liabilities rise from around pounds 30m to nearly pounds 50m. It has assets of only pounds 20m and has seen its liabilities rise from pounds 50m to more than pounds 70m.

Jeff Booth, a partner of Clay & Partners who are trustees to a number of the schemes including AGB, said: 'What has happened is that (lower) interest rates have pushed up the cost of the assets but also pushed up the liabilities.

'In a fully funded pension scheme this would not be a problem, but in the Maxwell schemes this just increased the gap between what there is and what is needed.'

Clay will try to make up some of the gap through a claim under Section 58B of the Social Security Act against the Maxwell private companies, which are in administration. While the claim is to be accepted by Arthur Andersen, the administrators, the payout from the companies is expected to be only a few pence in the pound.

Richard Thomas, a director of Law Debenture Trust, trustee of the massive Maxwell Works pension scheme, is confident that the shortfall can be made up through legal action by the trustees against various City firms, including Invesco and Lehman Brothers. They either advised Maxwell or looked after the pension funds. 'I remain cautiously optimistic that we will get the money we need,' he said.

Maxwell pensioners will lobby Parliament on Thursday, the day before the second anniversary of Robert Maxwell's death. One pensioner, Ivy Needham from Leeds, has been invited to meet the Prime Minister, John Major, to discuss the continued plight of Maxwell's former employees.