The Pensions Regulator issued a statement yesterday (01.11.2011) saying that the Polestar pension scheme is to be wound up.

The trustee of the scheme submitted a 40-year recovery plan reliant upon a substantial degree of investment outperformance. However, in April of this year Polestar UK Print Limited was purchased by Sun Capital which saw the company go into a pre-pack administration. The changing of hands meant that a £45m contribution which the trustees were depending upon (over a period of 12 years) was no longer available.

The scheme, which has approximately 8,350 members, had an estimated deficit, as at 31 March 2010, on a 'buy-out' basis of approximately £529 million. The deficit on the Pension Protection Fund (PPF) at that time was £166 million. Based on this, the regulator said full funding of the scheme over a reasonable period was unlikely and that the scheme should be wound up.

Stephen Soper, executive director for defined benefit (DB) regulation said in a statement: "With no employer support, the funding gap between the scheme's assets and liabilities could only be closed through taking excessive investment risk. This would not be in the best interests of the generality of members or PPF levy payers. We therefore believe that the trustees' decision to wind up the scheme is the right one."

The regulator added that as part of the regulator's developing approach to regulating the different segments of the DB landscape, they would continue to work closely with small schemes who are currently struggling to pay out their pensions.

Taking Polestar as an example, Soper also said: "In these cases, investment risk should only be taken to the extent that any downside can be underwritten by the sponsoring employer."

First published 02.11.11

azeevalkink@wilmington.co.uk