Mirror's cut in pension payments under fire
Newspaper's owner denies raiding funds as experts call forscrutiny by regulators
Friday 16 March 2012
The owner of the Daily Mirror has come under fire over a controversial move to slash payments into its pension fund by £69m over the next three years – even as the deficit soared.
Pensions experts have expressed surprise, with some urging regulators to investigate yesterday's decision by Trinity Mirror.
Ros Altmann, the director-general of over-50s organisation Saga, said it was "certainly not normal" and warned that the pension scheme's security was, at least in the short term, reduced.
Trinity Mirror had been due to make payments of £33m a year to reduce the deficit, which has jumped by more than half to £230m from £161m a year ago.
Sly Bailey, Trinity Mirror's chief executive, will now pay in only £10m a year between 2012 and 2014 and defer the remainder.
Ms Bailey rejected any suggestion that the company was carrying out a "pensions raid". She won the pension fund trustees' approval as she wanted to reach a separate, £110m refinancing deal with its bank lenders that was also announced yesterday.
Pensions are a sensitive issue as the late Robert Maxwell, a previous Mirror proprietor, illegally took cash from a pension fund two decades ago.
Trinity Mirror is saddled with net debt of £222m on top of its pension deficit.
The company's finance director, Vijay Vaghela, said: "Over time, Trinity Mirror will stand behind the deficit to make the payments."
Trinity Mirror only has a stock-market value of £100m as shares have slumped by 90 per cent during Ms Bailey's nine-year reign.
A source close to the company acknowledged it got better refinancing terms from lenders by reducing short-term pension payments.
The refinancing deal will help it to repay £168m of US private-placement loan notes which are due in the next three years.
John Ralfe, the independent pensions consultant, said: "Trinity Mirror is reducing deficit payments to its pension scheme for the next three years from around £100m to just £30m, so a US private placement can be repaid in full. The pension scheme is effectively being pushed behind these other creditors, who are being repaid first."
He added: "This action underlines the weakness of current pension regulation. What is the Pensions Regulator doing to make sure this does not create a dangerous precedent for other companies to push their pension scheme behind other creditors?"
A spokesman for the Pensions Regulator said: "We will scrutinise any reduction in contributions or other actions that increase risks to the scheme, and are prepared to take strong action where necessary."
The pension changes came as Trinity Mirror reported a 38 per cent slide in annual, pre-tax profits to £74m, explaining that the newspaper market is "still very challenging".
Ms Bailey is not a member of the Trinity Mirror pension scheme as she receives £248,000 a year as a cash contribution in lieu of pension as part of her £1.6m package.
She declined to comment on her pay but her base salary is being frozen, and added that there are no plans to cut more jobs after axing 75 editorial posts in January.
The Robert Maxwell pensions scandal casts a long shadow over the Mirror newspapers.
"I own the pension scheme," the media tycoon once boasted, before his death in 1991 when he went missing from his yacht at sea and was later found drowned.
It emerged later Maxwell had been illegally raiding the Mirror's pension scheme to prop up his ailing business empire. He stole more than £400m from some 32,000 members.
The 1995 Pensions Act included a string of safeguards in a bid to ensure such a scandal could not happen again.
The present industry watchdog, the Pensions Regulator now closely monitors funds and can demand trustees act to reduce deficits.
But some experts claim regulation is still not that strong and, if a company collapses, there is not always adequate pension protection.
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