The MG Rover Group Pension Scheme and the MG Rover Group Senior Pension Scheme bring back fond memories for me – they were two of the first pension schemes I ever worked on when I first fell into the world of pensions. That was nearly ten years ago. The pensions world has changed a lot since then, but the MG Rover Group saga has continued to rumble on.

Background

MG Rover Group Limited and its principal trading subsidiaries went into administration on 8 April 2005 and subsequently entered into a creditors' voluntary liquidation the following March.  Following these insolvencies the MG Rover Group Senior Pension Scheme entered a PPF assessment period.

In May 2005 the Secretary of State for Trade and Industry appointed inspectors to investigate the affairs of the MG Rover Group.  The final report was published by the inspectors in 2009.  The Pension Regulator was particularly interested in the inspectors' findings regarding the acquisition of a "Loan Book" by Capital.  This Loan Book was a portfolio of vehicle finance agreements with former customers of the MG Rover Group.  Capital had been set up specifically in 2001 to acquire the Loan Book and was established by a group including certain private individuals who were connected to and involved with the business of the MG Rover Group.  The acquisition was very lucrative for Capital and a number of years later in 2009 it entered a members' voluntary liquidation in 2009.

A critical discovery by the investigators was that a company within the MG Rover Group could have acquired the Loan Book, and in fact MG Rover Group provided significant funding to Capital to facilitate its acquisition.  The fact that the acquisition of the Loan Book could have been structured in such a manner to ensure the benefit was retained by MG Rover Group was a key factor in the Regulator's decision to issue a warning notice to Capital on 21 December 2012.  In this warning notice the Regulator threatened potential use of its moral hazard powers, in particular a Financial Support Director ("FSD").

After almost two years' worth of discussions the Regulator, in accordance with its powers under s89 Pensions Act 2004 published a report on its considerations which led to the exercise of its powers.  In this report, the Regulator stated that a settlement had finally been reached and that on 20 October 2014, Capital paid the Scheme received £8.085 million out of Capital's assets.

It is now expected that the Scheme will wind up outside the PPF with its members receiving benefits in excess of PPF level benefits.  Not only will these Members be breathing a sigh of relief but no doubt the PPF will also appreciate this early Christmas present!

Wedlake Bell Comment

This is a welcome example of when the Regulator is prepared to bare its teeth.  What we do not know is the value of the gain enjoyed by Capital and whether the amount secured via settlement was just enough to save the PPF from footing the bill or whether it resulted in a significant gain for the Scheme Members.  Indeed, the Regulator has reported that it no longer intends to issue an FSD.  Nonetheless, we expect the settlement was welcome news to the PPF and the Scheme's members alike.

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