MP criticises ‘inadequate’ pension probe settlement

Dan Jarvis, the Labour MP for Barnsley Central, plans to raise his concerns about the Pensions Regulator’s handling of the Carrington Wire case in Parliament. Mr Jarvis made the comments after the regulator confirmed that the settlement and funds sought in connection with its probe would not be sufficient to stop the Carrington Wire defined benefit scheme from entering the Pension Protection Fund.

Mr Jarvis said: “Although I am pleased that some sort of resolution has finally been reached I am disappointed by the Pension’s Regulator’s adjudication..Both the settlement reached and the contribution notice issued are inadequate. Although The Pensions Regulator has a difficult job to do - and I accept this was a complex case - as well as protecting the members’ interests there is a further crucial role of deterring other companies from acting in this way.”

Earlier this year, the regulator announced that an £8.5m settlement had been reached with two Russian firms - PAO Severstal and OAO Severstal-Metiz in connection with the Carrington Wire case. In April, the regulator’s determinations panel ruled that a contribution notice of £382,136 should be issued to a third ‘target’ – Richard Williams – whose company purchased Carrington Wire Ltd (CWL) for £1 from Severstal in 2010, and who benefited from a payment of £400,000 from the Russian group. As a result of the sale, a guarantee provided by Severstal to the pension scheme ceased to have any effect. The regulator and the scheme trustees were only informed of the sale after it had happened.

Severstal acquired Elland-based Carrington Wire in 2006, but in 2008 explored routes to exit. In 2010, Severstal informed the trustees, employees and the regulator that it had started a solvent wind-down of CWL and later closed the plant. CWL was left with only one material asset, a property, and no ongoing business, but retained a substantial liability to the scheme. Severstal assured trustees it would continue to honour the guarantee following the wind-down.

The regulator’s statement said: “However, without informing the trustees or the regulator, Severstal entered into negotiations with Richard Williams, sole director and shareholder of a shell company named Gillico Limited, for the sale of CWL. Severstal sold the entire shareholding in CWL to Gillico for £1, with a purported working capital adjustment of £400,000, the majority of which was received by Mr Williams personally. The sale meant that the scheme lost the benefit of the guarantee and became solely reliant on CWL, which Severstal had already wound down. In November 2012, the regulator issued a warning notice to three potential ‘targets’, indicating its intention to issue contribution notices in connection with the scheme.”

In January, an offer was made by the Russian companies to pay £8.5m to the scheme. The panel determined to issue a contribution notice against Mr Williams in the sum of £382,136, as this was the amount that Mr Williams received. In January, Severstal said that it met all of its obligations in relation to the pension scheme while CWL was under its ownership. The statement added: “The contested period, which has been under administrative review by the Pensions Regulator in the UK, relates to a period since 2010, when Severstal’s guarantee to meet CWL’s liabilities to the pension scheme expired, following the sale of CWL. Following the conclusion of the enquiry, we have agreed to pay £8.5m towards securing the future pensions of the former CWL employees.”

According to the independent trustees of Carrington Wire’s defined benefit pension scheme, the scheme’s deficit in May 2014 was in the region of £27m.

Stephen Soper, of The Pensions Regulator, said: “The conclusion of this complex case demonstrates that the regulator will, where appropriate, pursue its avoidance powers to seek to help protect member benefits, including in cases where targets are based overseas.”

The Yorkshire Post was unable to contact Richard Williams for comment.

In 2011, Mr Williams told the paper: “Carrington Wire ceased manufacturing in January 2010 and the companies operations were run down prior to my takeover. With regards to a pension guarantee, this is a matter between Severstal, the previous owners, and the pension trustees. I am not and never have been party to any such guarantee and I am not a trustee to the scheme and never have been.””