Partners at KPMG could face having to make up a £65m deficit in the accountant's pension scheme after a High Court ruling went against the firm yesterday.
The court ruled that the occupational pension scheme, which KPMG closed in March 2000, is a defined-benefit scheme, leaving the firm and its current partners liable for any shortfalls. KPMG had argued that the scheme was a defined contribution one, which would have left the fund's members carrying the cost of any deficit.
The £280m pension scheme was established in 1949 and is seen as somewhat unusual because it used members' individual contributions to buy a particular pension. Most defined-benefit schemes pay out an amount determined by the employee's length of service and final pay. However, the judge, Sir Andrew Morritt, rejected KPMG's argument that it was in effect a defined-contribution scheme.
Sir Andrew also ruled that the pension trustees could not cut the benefits already being paid to pensioners without the consent of the scheme's members.
The long-running dispute over the pension fund promoted six former partners to write to KPMG's chairman Mike Rake recently calling on him to honour the deficit regardless of the court's decision. "We urge the board to make substantial enhancements to its proposals ... to avoid KPMG being viewed as greedy and dishonourable in obtaining commercial advantage at the expense of pensioners and staff," the letter said.
KPMG dismissed the pension fund's then trustee Capita, who had asked the firm to make good the deficit, at the start of 2003. The new trustee Aon wrote to members last summer warning that "it is most probable that the trustee will have to reduce benefits to maintain the solvency of the scheme".
Analysts had estimated that members could see their benefits cut by up to one-fifth if the shortfall was not made good by the KPMG, the fourth largest accountancy firm.
KPMG was given leave to appeal against the ruling.Reuse content