More than 8,000 members of the pension scheme operated by Polestar – which has printed a string of famous magazines including Radio Times and Country Life – will today begin receiving letters detailing plans to wind it up in the new year.
The scheme's liabilities of nearly £900m will be taken on by the Pension Protection Fund, but the independent pensions consultant John Ralfe estimates that its funding position has weakened so much that the fund will be hit by a £300m loss.
The scheme's problems come from the fact that, when it was cut free from the financially troubled printer as a "zombie" scheme, Polestar had promised to inject £45m to help fill its funding shortfall. But the firm's financial problems continued and the scheme's trustees had to accept a fraction of that sum by selling to US private equity firm Sun Capital. That left them reliant on a high-risk, high-return investment plan to plug the deficit, rendered impossible after the markets plummeted in August.
As a result of the wind-up, more than half the scheme's members who still work will receive only 90 per cent of the pension they had expected and less protection from inflation than if the scheme were operating. Retired people will still be paid, but with less inflation-proofing.
Mr Ralfe is critical of how the Polestar situation has been allowed to deteriorate. He said the loss faced by the PPF – funded by contributions from existing pension schemes – would have been much less if the body had taken on the scheme in 2006 when it was cast off from Polestar.
"With £500m in assets, if Polestar had entered the PPF in December 2006, the hit would have been around £70m. The Pensions Regulator should be required to explain why it allowed the scheme to become [a] zombie relying on ultra-aggressive investment strategy of double or quits," he said.
The scheme trustees would not comment yesterday, but the Pensions Regulator's chief executive Bill Galvin said: "It is rare that the best option for a pension scheme will be separation from the sponsor. Where we have given clearance for such an event, it is because we have been convinced that insolvency of the sponsor is otherwise inevitable, and an alternative arrangement appears to deliver a better position."