Federal Mogul, the US car parts manufacturer, pulled the plug on the pension fund of its UK subsidiary Turner & Newall yesterday, sending the scheme towards an almost certain wind-up over the next few months.
After months of negotiations between the fund's independent trustee and Carl Icahn, Federal Mogul's major bondholder, the US group said it was withdrawing its offer to keep the fund open and would no longer be making its minimum funding contributions.
The move will leave the £1bn scheme, which has 40,000 members, with no choice but to wind up, crystalising an £875m deficit. After a controversial last-minute amendment to the Pensions Bill last month, the scheme may qualify for the privately funded Pensions Protection Fund if it winds up after next April. This would guarantee its members compensation of 90 per cent of their pensions.
However, if the scheme winds up before April, it will fall on the government-funded Financial Assistance Scheme (FAS), which already has claims from 65,000 members of other failed schemes to settle. The Government has provided only £400m for the FAS, a fraction of what pension experts believe is necessary.
A spokesman for the fund's independent trustees said: "We had hoped to be able to find a way of enabling the pension scheme to continue and be restored to a sound financial position, on the basis of solid financial commitments from Federal-Mogul. Unfortunately, Federal-Mogul has not felt able to do this in view of uncertainty about the new statutory regime to be brought in under the recently passed Pensions Act and has now withdrawn its offer to continue the pension scheme."
Ros Altmann, a pensions adviser at No 10, said: "I feel genuinely sorry for the workers. I hope it will inspire them to get to grips with it."Reuse content