Cashmere clothing maker Dawson International has gone into administration after the Pension Protection Fund (PPF) and Pensions Regulator rejected its request to put its pension plans into a protection fund.

Shares of the firm were suspended last week after it became clear that the pension funds' trustees had demanded Dawson to produce £50m in cash before 19 August to make up for the huge deficit in the firm's defined benefit (DB) schemes.

Dawson's attempted offer to the PPF last month included a 33% stake in the firm plus cash and a loan note.

After the proposal to the PPF was rejected the firm released the following statement, still hoping to seek an alternative with the trustees, an option now no longer available: "The company has striven for many years to reduce the deficits on the plans, making contributions of £2.2m in the last financial year alone. Despite these efforts, the deficits have widened, mainly due to changes in actuarial assumptions, and associated costs have risen significantly."

It said that the regulator and PPF stated that the compensation offered by the company was insufficient in comparison to the size of the deficit the PPF was being asked to assume. Dawson says it is stunned by the negative decision and claims it is not a just one due to the following factors:

- "The PPF\TPR is using the s.75 (buyout basis) deficit as its reference which is significantly higher than the s.179 (PPF liability basis) deficit which the PPF would fund.

- Scheme assets at March 2012 were £117.7m, £9.4m higher than at March 2011.

- Scheme liabilities are valued on an actuarial basis which fluctuates significantly and is outside the control of the Company.

- The company simply has no more to offer."

David Bolton, chairman of Dawson International, showed his anger at the decision by saying that "it should be a matter of wider concern that the UK pensions reporting and regulatory environment can produce such an evidently unsatisfactory outcome". In an interview with City A.M. he also said that the PPF was "not fit for purpose".

The PPF's executive director for financial risk, Martin Clarke, responded to the attacks by saying the offers were simply "inadequate".

"We exist to protect people's pensions in the event of company insolvency and inadequate pension scheme funding and our costs are met by all eligible pension schemes," Clarke said. "On rare occasions, we will - alongside the Pensions Regulator - consider transactions which allow a company to continue to operate with the pension scheme being taken on by the PPF.

"We do not enter such arrangements lightly and only agree them if a number of stringent tests are met. Unfortunately, in this case the offers made to take on the pension scheme, given the size of the deficit in the scheme, were inadequate. 

"In all cases, we apply clear and consistent principles, taking into account the likely impact they may have on pension scheme members as well as the cost to the other pension schemes which pay our levy. We will be working with the administrators to make sure that the interests of the Dawson pension scheme members are best represented."

The BBC reports that administrators at KPMG said the firm collapsed yesterday with a pension debt of £129m. This was the outstanding amount after the PPF refused to take on the liabilities.

The scheme is said to provide pensions to roughly 4000 retired staff members.

First published 16.08.2012

azeevalkink@wilmington.co.uk