The £367 million ($592 million) Northern Rock PLC Pension Scheme, Newcastle upon Tyne, England, will remain with the so-called “bad bank” as part of the government restructuring of Northern Rock.
The move is intended to attract potential buyers for the other newly created Northern Rock PLC, dubbed the “good bank,” which has about £19 billion in savings accounts and another £10 billion in mortgages, sources said.
In 2008, the U.K. government nationalized Northern Rock with an injection of about £1.4 billion to keep the bank afloat. As of Jan. 1, the bank was split in two, with Northern Rock (Asset Management) PLC, the “bad bank,” to hold a residential mortgage book valued at about £50 million among other difficult-to-sell assets. Northern Rock (Asset Management) will also retain the historic assets and liabilities of the company's defined benefit pension scheme, which closed to new members in 1999, according to spokesman Simon Hall.
The new Northern Rock PLC, which is likely to be sold in a bid by the U.K. government to recover the cost of bailing out the bank, will introduce a new DB pension scheme “that mirrors the entitlements of the old scheme” for existing DB members, Mr. Hall said. Information on the defined contribution plan was not available at press time.