UK Coal's pension scheme has now entered the Pension Protection Fund (PPF), the company announced.

Since the company is restructuring its mining operation, the PPF will now take on the pension scheme's assets and liabilities and provide compensation for its 7,000 members.

The PPF will not own the new company, but instead its interest in the new company will consist of a series of debt instruments.

Martin Clarke, PPF executive director for financial risk, said: "We are very pleased to have been able to work with the company to put together this innovative plan. It means that pensions have been protected, the company can continue trading as a going concern and that 2,000 jobs have been saved from an uncertain future.

"It became clear to everyone involved very quickly that, whatever the future held for UK Coal, its pension scheme would come into the PPF because of the size of its deficit."

In return for taking on the pension scheme deficit, the PPF said it will receive regular payments from the new company, which over time are expected to be "materially higher" than any sum it would have received had the company become solvent.

"This is good news both for our members and our levy payers," Clarke said.

He added: "The PPF is a mature and significant financial institution with assets of £20 bn. We are built to take on this level of pension deficit and there is no question about our ability to pay compensation, not just for UK Coal scheme members, but for all our members, for as long as they need it."

In conjunction with this news, the PPF has published a document entitled 'Making a Recovery', which outlines the PPF's role in company rescues.

First published 09.07.2013

monique_simpson@wilmington.co.uk