Coats Group PLC, an industrial thread manufacturer, will pay £255 million ($320.5 million) following a settlement with the U.K.’s Pensions Regulator to cover the benefits of two of its U.K.-based defined benefit funds, the regulator said in a news release.
The Pensions Regulator said it will now discontinue anti-avoidance action in respect to the two pension funds, the £1.4 billion Coats Pension Plan, Glasgow, Scotland; and the Brunel Holdings Pension Scheme, Middlesex, England. The size of the Brunel plan could not be learned by press time.
The settlement deal also includes annual deficit contributions totaling £14.5 million, including estimated administration expenses and levies, to be paid until 2028.
“This is a substantial settlement of our (financial support directions) case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do,” said Nicola Parish, executive director of frontline regulation at TPR, in a news release. “The settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”
The deal covers 90% of members of the Coats and Brunel pension funds, which along with a third pension fund were under investigation from the regulator. Coats received warning notices in 2013 and 2014 due to swelling deficits of these pension funds. As of June 30, the combined deficit for the three U.K. plans was £349 million.
The pension funds were closed to new participants in 2014.
The trustee of the third pension fund, Staveley Industries Retirement Benefits Scheme, has not accepted Coats’ proposal to date. As a result, TPR’s investigation remains ongoing in regard to that plan.
“The proposal remains open to the trustee of the Staveley scheme and the remaining parent group cash will be reserved for this purpose,” Coats said in separate news release.