T&N pension fund heads for rescue

Lawrence Churchill, head of the PPF, is set to rescue the T&N scheme

More than 35,000 members of the Turner & Newall pension scheme are set to be bailed out by the Pension Protection Fund (PPF).

T&N, once the world's largest manufacturers of asbestos, became insolvent five years ago.

Its administrators and the pension fund trustees have now applied to the PPF for a formal rescue.

This will guarantee current pensions in payment but offers just 90% of expected pensions for those yet to retire.

Tim Culverhouse of Alexander Forbes, the independent trustees overseeing the T&N scheme, welcomed the news.

"It is disappointing that any members will lose some of their pension entitlement," he said.

"But compared with the situation at the start of our negotiations, when members were facing losses of up to 70% of their pensions, this is a much improved potential outcome."

Safety net

The PPF, which started in April 2005, operates as a safety net for insolvent pension schemes rather than offering full compensation.

If the PPF rescues a scheme, pension payments rise in line with inflation up to a maximum increase of 2.5% a year. Also, these increases only apply only to the pension earned after April 1997 - pension benefits earned before this date are frozen.

For those yet to retire, or who have retired early (other than on grounds of ill health) the pension will be just 90% of their previous entitlement.

Also, their maximum potential pension is currently capped at £26,050 a year.

The T&N scheme has more members than any of the other 94 funds which have so far applied to the PPF, which now covers 74,000 members in total.

Holding pen

The PPF will subject the T&N scheme to a formal one-year assessment process - known as being in the holding pen - to ensure that it does in fact qualify to be rescued.

If it does, then its assets, currently estimated at about £1bn, will be absorbed by the PPF which will then take on responsibility for paying the pensions.

The scheme currently has a deficit of about £150m after T&N's parent company, the US car parts group Federal Mogul, injected an extra £250m into it last year.

The US company had also declared itself insolvent in 2001 to avoid being overwhelmed by growing compensation claims from asbestosis victims.