£250m boost to T&N pension scheme

Turner & Newall's pension scheme has been frozen since July 2004

Federal-Mogul, the US parent company of vehicle parts maker Turner & Newall (T&N), has paid £250m into the firm's frozen pension scheme.

T&N went into administration after huge asbestos claims. T&N's pension scheme had a £900m shortfall at the time.

The payment may ease the way for the pension scheme to be helped by the government's pension protection fund.

The fund is essentially an insurance plan meant to ensure members get their pension if their employer goes bust.

The T&N pension scheme, which has 37,000 members, was frozen in July 2004.

Since then, negotiations have taken place between Federal-Mogul and trustees of the pension scheme with the aim of reducing the shortfall.

Federal-Mogul bought T&N in 1998. Three years later, T&N went into UK administration and Federal-Mogul entered Chapter 11 bankruptcy protection, because of huge asbestos liability claims.

Resources fear

Unless the T&N pension scheme deficit was dealt with, unions representing its members feared the workers could lose up to 60% of their pensions.

At the same time, the trustees of the T&N pension scheme have spoken to the government's pension protection fund (PPF) to see whether it could take on the scheme's liabilities.

If the PPF were to take on liability for the T&N pension scheme, it could prove to be a major drain on resources.

It has been estimated that the likely cost of supporting the T&N scheme could eat up two years' premiums into the PPF.

The PPF started in April and is essentially an insurance plan, which all final salary pension schemes must belong to.

A pension scheme can resort to the PPF if it does not have enough money to pay its members' pensions.

Retired scheme members will receive 100% of their pension, while members still of working age should get at least 90% of the pension they were due to receive when they retired.

In a statement, the T&N pension trustees said: "The question of whether the T&N scheme will be admitted to the PPF remains to be finally resolved."