The Pensions Regulator (TPR) has today published its reasons for issuing Financial Support Directions (FSDs) against five companies that form part of the ITV group.
The FSDs require that ITV provides support for the Box Clever Group Pension Scheme, which has a deficit of £62m. Under UK pensions law, FSD recipients have to ensure that reasonable financial support is put in place for a particular pension scheme.
TPR's executive director for defined benefit regulation, Stephen Soper confirmed that the determination panel responsible for the decision had found that the five companies that now make up ITV in its present form (Granada UK Rental & Retail Limited, Granada Media Limited, Granada Group Limited, Granada Limited and ITV plc), received valuable financial benefits from the creation and structure of the Box Clever joint venture.
"A highly leveraged structure was used, leaving the sponsoring employers in a weak position," he said.
Box Clever was set up in 2000 as a merger of Granada and Thorn TV's rental businesses.
Its aim was to enable Granada and Thorn to extract the full value of the businesses in cash. Granada, which later merged with Carlton Communications to form ITV, received over £500m. In order to fund this Box Clever had to borrow £860m.
Just over 3 years later, in September 2003, PriceWaterhouseCoopers were appointed administrative receivers after the Box Clever companies proved unable to service the debt.
In 2005 the Box Clever businesses were sold to new owners by the administrative receivers. The proceeds were not sufficient to meet the claims of the unsecured creditors of which the pension scheme was one. At the end of 2009 it had assets of only £14.4m to cover the £76.5m needed to provide pensions for its 3,000 members.
"The decision is potentially good news for the three thousand members of the scheme," Soper said, "but the case is still at an early stage." The companies in this case have referred the decision to the Upper Tribunal. TPR cannot issue FSDs while appeal proceedings are pending.
As TPR explains, recipients of a FSD have currently a lot of flexibility, as the law does not state precisely what is meant with the phrase "reasonable financial support".
Soper said one of TPR goals would be to continue to work closely with trustees in the future to protect members' benefits and limit the risk of schemes entering the Pension Protection Fund (PPF).
azeevalkink@wilmington.co.uk
