MPs call for more pension safeguards in bids

Politicians waded into the Alliance Boots pension row yesterday, tabling an Early Day Motion questioning the power of pension trustees to secure the future of their members.

A cross-party group of MPs urged the private equity house Kohlberg Kravis Roberts, which has agreed an £11.1bn takeover of the chemist, to reach a speedy settlement with the Boots pension scheme trustees. The Work and Pensions Select Committee (WPSC) also called on the Government to look into the powers of pension-fund trustees to investigate whether they are able to protect the interest of their members after an acquisition by a highly leveraged company.

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KKR and the pension trustees are in last-ditch talks to try to come to some agreement over the future of the scheme ahead of 21 June, when the takeover will be put forward for court approval. The trustees have threatened to take legal action to block the takeover, but sources said an agreement is now looking likely this week.

KKR has offered the scheme, which has more than 66,000 members and a £305m deficit, about £340m over 10 years plus a £600m safety package. It is understood the trustees had wanted a higher figure upfront. The two sides are believed to be thrashing out details. If they have not come to an agreement before the court hearing, lawyers say it has the potential to be a "serious legal hurdle".

Norman Russell, the head of pensions at the law firm Berwin Leighton Paisner, said: "This is pretty much uncharted territory. How will a judge make a decision on whether the pension scheme is a creditor he can listen to or whether it is prejudiced? It is difficult to predict."

The WPSC has called the pensions regulator, David Norgrove, into a private meeting next Thursday, the same day as the court hearing. Mr Norgrove will be questioned over how effective the regulator has been in the whole debate.

Jenny Willott, the Liberal Democrat MP for Cardiff Central, who tabled yesterday's motion, said it was important to focus on the issue now because of the implications it may have for the future of other schemes under similar private-equity takeovers.

"As the largest-ever private equity takeover, it is a precedent-setting deal," she said. "The uncertainty for people in the pension scheme must be uncomfortable. It is not a short-term impact. It goes on for decades into the future."

She said the debate had raised the bigger question about the power of trustees. "Pension trustees have a legal responsibility towards the pension scheme members," she said. 'There is the question of whether they have the power they need to resolve this." She hopes to garner the support of more MPs this week.

The GMB union, which has been campaigning against private equity takeovers of high-street names, said the industry has been exposed. Paul Maloney, a national officer at the GMB, said Alliance Boots executives became millionaires overnight while failing to safeguard workers' pensions. "They have to commit to fully fund the pension scheme, in cash and upfront," he said.

Alliance Boots accepted an 1,139p-a-share offer from KKR and the company's deputy chairman, Stefano Pessina, in April. Last month, John Watson, the head of the pension trustees, strongly criticised Alliance Boots for agreeing to the takeover before a deal was reached on pension provisions. But the chairman, Sir Nigel Rudd, said it was one of the "best run and best funded" schemes in the FTSE 100 and he had had assurances that it would continue that way after the company was taken private.