Greg Wright: Workers' pensions ordeal reveals watchdog lacks bite

ONCE the path to financial happiness was pretty straightforward.
Darren Rhodes is among the Carrington Wire workers seeking pension justice.Darren Rhodes is among the Carrington Wire workers seeking pension justice.
Darren Rhodes is among the Carrington Wire workers seeking pension justice.

You worked hard and scrimped and saved for a pension. And then, after decades of loyal service to your employer, you could put your feet up secure in the knowledge that your pension was as safe as the Bank of England.

This scenario has a hollow ring to the 500 former workers at Carrington Wire, and their story raises questions about whether our regulators have enough power to protect our pensions.

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The Carrington Wire saga – which has been kept in the public eye by a committed band of campaigners and the local MPs Dan Jarvis and Craig Whittaker – must make us worry about our own retirement.

Mr Jarvis, Labour MP for Barnsley Central, claims that the Government’s pensions regime is simply not fit for purpose because it fails to protect British workers from bad bosses and predatory firms. He believes Carrington Wire is a cautionary tale.

The saga began in 2010 when Carrington Wire, based in Elland, West Yorkshire, closed with the loss of more than 80 jobs. The Russian parent company Severstal said it was due to a contraction in the steel wire market.

Shortly after the firm closed, Craig Whittaker, the Conservative MP for Calder Valley, wrote to the Pensions Regulator, asking it to investigate the position of the Carrington Wire pension scheme, after what remained of the business was sold out of the Severstal group.

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As time went by, the 500 members of Carrington Wire’s defined benefit scheme became increasing anxious, and angered by the regulator’s failure to set a date for concluding its investigation.

When I met some of the former Carrington Wire workers, I was struck by their determination and dignity.

All they expected from the powers-that-be was swift action to stop their pension falling into a protection fund.

I can never forget the words of Darren Rhodes, who worked as a technical manager at Carrington Wire: “I followed the Government’s advice and from an early age put as much money as I could into my pension. I’m devastated.”

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In 2012, the Pensions Regulator finally issued a warning notice to three potential “targets”, indicating its intention to issue contribution notices in connection with the Carrington Wire defined benefit pension scheme. It included two businesses based in Russia – PAO Severstal and OAO Severstal-Metiz.

The Carrington Wire pension scheme members anxiously waited to hear the outcome of the investigation. And waited.

Then, shortly before a hearing was due to take place in January 2015, an offer was made by the Russian companies to pay £8.5m. The regulator agreed that, if the sum was paid, it would withdraw its case.

A Severstal spokesman said the company had met all its obligations to the pension scheme while Carrington Wire was under its ownership. The contested period related to a time after 2010, when Severstal’s guarantees to meet Carrington Wire’s liabilities to the pension scheme expired, following the sale of the business, the spokesman said.

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However, the final settlement achieved by the regulator was not sufficient to stop the scheme from entering the Pension Protection Fund (PPF). The PPF was set up to ensure that most of an employee’s promised pension will be paid when a company collapses. This insurance is not funded by taxpayers, but by employers sponsoring all other defined benefit pension schemes, who pay a levy.

The Carrington Wire defined benefit pension scheme’s deficit in May 2014 was in the region of £27m, so it was hardly surprising that it had to enter the PPF.

A PPF spokesman said that members of the Carrington Wire defined benefit pension scheme who had not yet retired were expected to receive around 90 per cent of the pension entitlement they had built up before the company went bust. Members who have already retired have, in general, received 100 per cent of their entitlement, the spokesman added.

Mr Jarvis is still bitterly disappointed that 500 blameless Yorkshire workers have been forced to watch their pension scheme enter a protection fund. He questions whether the Pensions Regulator has the resources to do its job properly. He’s written to the new Pensions Minister, Richard Harrington, urging him to carry out a wholesale review of pension protection regulations.

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The Government still insists that the Pensions Regulator has robust measures to protect pension scheme members and the PPF. It has achieved “notable settlements” by using its anti-avoidance powers, a spokesman told me.

They then cited the investigation into the Carrington Wire scheme. It seems strange that the Government should regard the outcome as a triumph. I’m sure the Champagne corks were not popping in Darren Rhodes’ house.

With tougher action, they believe the case could have been settled years earlier, without causing anguish to them and placing extra strain on the protection fund. They must wonder if the regulator blinked first.

Greg Wright is the deputy business editor of The Yorkshire Post

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