In a background paper written for the Work and Pensions Committee, Professor Prem Sikka of the University of Essex has broken down the constituent parts of the pre-pack administration arrangement that acts against the interests of pensioners.
Pre-pack arrangement figure breakdown
Examining the pre-pack arrangements for Bernard Matthews Ltd, Professor Sikka notes that the business is in administration and the sale proceeds of the company will be used to make a full payment of £46.4 million to lenders Wells Fargo Capital Finance (UK) and PNC Financial Services UK Ltd. Rutland Partners, which has already received £34 million, is likely to receive a total of £39 million.
In contrast, the Bernard Matthews Pension Fund, recording a published deficit of £17.5 million, which is likely to have grown to £20 million, is likely to receive 1p in the pound at best.
The administrators have already billed £790.000 and legal fees are likely to amount to £668.000.
Professor Sikka on the administration strategy
Professor Sikka writes in his brief to the Committee:
"The administration strategy seems to have been carefully crafted to enable secured creditors and controllers of Bernard Matthews to extract maximum cash from the company and dump the pension scheme and other liabilities. No attention has been paid to the hardship caused to retired and existing employees."
Frank Field MP, Chair of the Work and Pensions Committee, said:
"What looks likely to be an increase in these pre-pack arrangements, which act to the huge detriment of pensioners, and bump up still further the levies on good employers through increased Pension Protection Fund contributions, is no doubt an issue the Committee will want to look at early on Parliament's return.
We expect that the Government will soon publish a new Pensions Bill, and this may offer the Committee an opportunity of proposing further reforms so as to protect better the position of pensioners in circumstances similar to Bernard Matthews Ltd."
In one of its early reports of this Parliament, the Committee requested that the Government introduce a new Pensions Bill to strengthen the regulation of pension master trusts. This is likely to form the basis of the new Bill.