J O Walker & Company plc Pension & Life Assurance Scheme (PDF

DETERMINATION NOTICE
under section 96(2)(d) of the
Pensions Act 2004 (“the Act”)
The Pensions
Regulator
case ref:
1365/05
To:
Of:
To:
Of:
To:
Of:
To:
Of:
To:
Of:
Scheme: J O Walker & Company plc Pension & Life Assurance Scheme
The Trustee Corporation Limited
Trinity Court
16 John Dalton Street
Manchester
M60 8HS
Ian Best
Ernst & Young LLP
No 1 Colmore Square
Birmingham
B4 6HQ
Alan Lovatt
Ernst & Young LLP
No 1 Colmore Square
Birmingham
B4 6HQ
Simon Allport
Ernst & Young LLP
No 1 Colmore Square
Birmingham
B4 6HQ
Springwood plc
Swithland Hall
Swithland
Leicestershire
LE12 8TD
Date: 20 March 2006
TAKE NOTICE that the Pensions Regulator of Napier House, Trafalgar Place,
Brighton BN1 4DW (“The Regulator”) has made a determination on
15 March 2006
1. Determination
1.1 The Pensions Regulator is to determine whether an order should be
made authorising the J O Walker & Company plc Pension & Life
Assurance Scheme to be put into wind up
DM No: 524218
1

1.2 The application was granted
2. Procedure Followed: Standard
2.1 By its Warning Notice dated 26 January 2006 (“the Warning Notice”) the
Pensions Regulator gave notice that it proposed to take the above action
pursuant to the application of the Independent Trustee, The Trustee
Corporation Limited.
2.2 The Regulator determined that the following parties are directly affected by
this determination:
1. The Trustee In its role as trustee of the scheme
Corporation Limited
2. Ian Best of Ernst & In his role as administrative receiver
Young LLP
3. Alan Lovatt of Ernst In his role as administrative receiver
& Young LLP
4. Simon Allport of In his role as administrative receiver
Ernst & Young LLP
5. Springwood plc In its role as principal employer
(collectively referred to as “the directly affected parties”)
These directly affected parties were entitled to make representations to the
Pensions Regulator about the determination.
2.3 Following the issue of the Warning Notice none of the directly affected parties
exercised their right to make representations to the Pensions Regulator.
3.
Relevant Statutory Provisions/Legislation
Section 11 of the Pensions Act 1995 as amended by the Pensions Act 2004.
11 Powers to wind up schemes
(1) Subject to the following provisions of this section, the Authority may by
order direct or authorise an occupational pension scheme to be wound
up if they are satisfied that –
(a) the scheme, or part of it, ought to be replaced by a different scheme,
(b) the scheme is no longer required, or
(c) it is necessary in order to protect the interests of the generality of the
members of the scheme that it be wound up.
(2) The Authority may not make an order under this section on either of
the grounds referred to in subsection (1)(a) or (b) unless they are
satisfied that the winding up of the scheme -
(a) cannot be achieved otherwise than by means of such an order, or
DM No: 524218
2

(b) can only be achieved in accordance with a procedure which:
(i) is liable to be unduly complex or protracted, or
(ii) involves the obtaining of consents which cannot be obtained, or
can only be obtained with undue delay or difficulty,
and that it is reasonable in all the circumstances to make the order.
(4) An order under this section authorising a scheme to be wound up must
include such directions with respect to the manner and timing of the
winding up as the Authority think appropriate having regard to the
purposes of the order.
(5)The winding up of a scheme in pursuance of an order of the Authority
under this section is as effective in law as if it had been made under powers
conferred by or under the scheme.
(6)An order under this section may be made and complied with in relation to
a scheme -
(a) in spite of any enactment or rule of law, or any rule of the scheme,
which would otherwise operate to prevent the winding up, or
(b) except for the purpose of the Authority determining whether or not they
are satisfied as mentioned in subsection (2), without regard to any such
enactment, rule of law or rule of the scheme as would otherwise require, or
might otherwise be taken to require, the implementation of any procedure
or the obtaining of any consent, with a view to the winding up.
(6A)Subsection (6) does not have effect to authorise the Authority to make an
order as mentioned in paragraph (a) or (b) of that subsection, if their doing so
would be unlawful as a result of section 6(1) of the Human Rights Act 1998
(unlawful for public authority to act in contravention of a Convention right).
Section 100 of Pensions Act 2004 – Duty to have regard to the interests
of members etc
(1) The Regulator must have regard to the matters mentioned in subsection
(2) –
(a) when determining whether to exercise a regulatory function –
(i) in a case where the requirements of the standard or special
procedure apply, or
(ii) on a review under section 99, and
(b) when exercising the regulatory function in question.
(2) Those matters are –
(a) the interests of the generality of the members of the scheme to which
the exercise of the function relates, and
(b) the interests of such persons as appear to the Regulator to be directly
affected by the exercise.
DM No: 524218
3

4. Background to the Application / Case
The independent trustee to this scheme, the Trustee Corporation Limited,
was statutorily appointed under section 23(1)(b) of the Pensions Act 1995 on
12 March 2004 by the administrative receivers to the employer, Ian Best,
Alan Lovatt and Simon Allport of Ernst & Young LLP. The administrative
receivers were appointed on 19 February 2004.
The independent trustee originally applied to Opra for a winding up order on
1 September 2004.
The Scheme Rules, Rule 23 Discontinuance or partial discontinuance of the
scheme, provides as follows:
The Principal Employer may at any time decide that all contributions to the
Scheme shall cease and shall give at least three months notice of such
cessation to the Administrator who shall notify the members in writing. At the
date of the cessation unless previously terminated cover in respect of the
benefits payable on death-in-service before Normal Retiring Date shall cease
(except for the refund of contributions under (Rule 9(1)(ii) and the Scheme
shall be wound up in accordance with sub-Rule(2) of this Rule unless within
one month of its decision to terminate payment of contributions the Principal
Employer shall request and the Insurance Company shall agree that the
Scheme be treated as a frozen scheme in which event the provisions of sub-
Rule (1) of this Rule shall apply.
In the event of the Principal Employer being wound up or if the Principal
Employer is not a limited company its business being sold the Scheme shall
be wound-up in accordance with sub-Rule (2) of this Rule.
(1) Frozen Scheme
On the Scheme being frozen the following shall apply:-
(i)
(ii)
(iii)
(iv)
the Scheme shall be closed to new entrants
all contributions to the Scheme shall cease and members
shall have no entitlement to further benefits
the Policy shall continue to be held on trust by the body or
persons in whom it is vested for the members of the scheme
the Rules (other than those relating to the eligibility of new
entrants or to contributions) shall continue to apply in all
respects.
The trustee advised that none of the conditions which would trigger wind up
under the scheme rules, i.e. 3 months notice by the employer to the trustee
that it had decided to cease contributions, the limited company employer
being wound up or the business of a non incorporated employer being sold,
applied in this case. The trustee could find no evidence that the employer
served the appropriate notice on the trustee and the employer, which is a
public limited company, although in administrative receivership, has yet to be
wound up.
DM No: 524218
4

Under Rule 21 of the Scheme Rules it states that the Deed and Rules may
be amended only by the employer. In light of this the independent trustee
was of the view that it could not make amendment to the scheme itself.
The trustee stated that it considered that the wind up was necessary in order
to protect the interests of members because:
• The fund was being eroded by the costs of the advisers
• The fund was exposed to investment risk
The independent trustee advised Opra that the scheme might have been put
into wind up some years earlier but no documentary evidence had been
located to show that the employer had given the requisite notice to the
trustee and none of the other conditions existed to trigger wind up. Prior to
the statutory appointment of the independent trustee the employer was also
the trustee to this scheme.
The trustee requested the administrative receivers to provide the required
notice in respect of the termination of all contributions but they declined to do
so stating that their legal advisers indicated that they could not sign any such
notice because they only acted as agents of the company. The trustee
considered that it would be an expensive and protracted exercise to pursue
this avenue further.
In December 2004 the independent trustees withdrew their application on the
basis that it had subsequently located a document that indicated that wind up
had been triggered.
The independent trustee subsequently made a further application to the
Regulator to re-open their previous application for an order authorising the
winding up of the scheme under section 11 of the Pensions Act 1995 by way
of a letter dated 8 July 2005. The application was made on the same basis
that it had previously been made.
The trustee’s investigations into the effect of the documents they located
revealed that the scheme was made paid up in 1996 but that there was no
unequivocal evidence that the scheme was actually put into wind up. Other
documents located by the trustee indicated that in 1998 there was some
intention to re-open the scheme in order to allow certain employees to join
the pension scheme.
The trustee advised that it continued to be of the opinion that it had no power
to trigger wind up under the rules of the scheme and that none of the
particular circumstances which would trigger wind up currently existed.
It is noted that as this scheme is currently assumed not to be in wind up and
it is possible for the employer to suffer a second qualifying insolvency event
(in particular the employer company may be wound up) the scheme may
possibly fulfil the eligibility criteria for the Pension Protection Fund. However
information relating to the scheme funding position had been obtained by the
DM No: 524218
5

Regulator including a statement from the scheme actuary, advising that in his
opinion, the scheme would not need assistance from the Pension Protection
Fund. The actuary indicated that buy out quotations had been obtained
which would provide close to 100% of members’ benefits, provided the
scheme was wound up quickly. The trustees had supplied information
detailing the tasks remaining to wind up the scheme.
The determinations panel considered whether the exercise of their reserved
regulatory power was appropriate and then considered all the facts of the
case, paying particular attention to section 100 of the Pensions Act 2004.
5. Facts and Matters Relied Upon
1. The Panel considered that the scheme was not in wind up status,
accepting
the evidence of the applicant
2. The panel accepted the evidence of the scheme actuary that the buy-out
quotation was for a valuation close to 100% of members benefits and that
no advantage to members would be achieved by delaying a wind up
which would allow buy-out to proceed
3. The Panel considered therefore that it was necessary to wind up the
scheme in order to protect the interests of the generality of the members
of the scheme pursuant to section 11(1)(c) of the Pensions Act 1995
4. The Panel considered that whilst the scheme was in non wind up status
the fund could be eroded by the costs of the advisers
5. The Panel considered that whilst the scheme was in non wind up status
the fund was exposed to investment risk
6. Conclusion: Details of Determination
1. The Pensions Regulator hereby directs that J O Walker & Company plc
Pension & Life Assurance Scheme commence wind up proceedings with
effect on and from 28 days following the date of this order, that is 17 April
2006, in accordance with section 96(5)(a) of the Pensions Act 2004.
2. This Order is made because the Pensions Regulator is satisfied that it is
necessary to wind up the scheme in order to protect the interests of the
generality of the members of the scheme pursuant to section 11(1)(c) of
the Pensions Act 1995
3. The Scheme be wound up in accordance with the provisions of sections
73-75 of the Pensions Act 1995 (as modified by the Occupational
Pension Schemes (Winding Up) Regulations 1996 and any relevant
provisions of those regulations, or such other statutory provisions and
regulations as may be in force from time to time and may be applicable to
the winding up of the scheme.
DM No: 524218
6

7. Decision Maker
The determination which gave rise to the obligation to give this Determination
Notice was made by the Determinations Panel.
8. Scheme details
Type of scheme
Status of scheme
Defined Benefit
Closed
Membership 120
Size of fund £3.69m t 31 December 2002
Contracted in/out
Contracted out
9. Scheme trustees
Name Period of office Status of trustee
1. The Trustee
Corporation
Limited
From 12 March 2004 to present Statutory independent trustee
appointed by the insolvency
practitioner
10. Scheme advisers
Type Name Period of office Company
1. Scheme Actuary Graham Cooper From January 2004 to
present
2. Scheme Actuary Mr N Mitchell From 30 November 2000 to
January 2004
3. Scheme Actuary Mr R Chadwick From 1 July 2000 to 25 July
2000
Harsant Services
Limited
Harsant Services
Limited
Harsant Services
Limited
4. Scheme Actuary Mr J D Harsant From unknown to 1 July 2000 Harsant Services
Limited
5. Scheme Actuary Mr A Soni From unknown to April 1999 Commercial Union
6. Insurer Dates unknown Commercial Union,
now Norwich Union
7. Scheme Auditor From unknown to present Grant Thornton
8. Administrator From April 2000 to present Harsant Services
Limited
9. Administrator From unknown to April 2000 Bland Bankart
Financial Services
Limited
11. Employer details
Name
Address
Springwood Plc (in administrative receivership)
Ernst & Young LLP
No 1 Colmore Row
DM No: 524218
7

11. Employer details
Nature of
business
Number of
employees
Birmingham
B3 2DB
Other entertainment activities
Unknown
12. Important Notices
This Determination Notice is given to you under sections 96(2)(d) of the Act.
The following statutory rights are important.
13. Referral to the Pensions Regulator Tribunal
13.1 You have the right to refer the matter to which this Determination Notice
relates to the Pensions Regulator Tribunal (“the tribunal”). Under section
103(1)(b) of the Act you have 28 days from the date this Determination
Notice is given to you to refer the matter to the Tribunal or such other period
as specified in the Tribunal rules or as the Tribunal may allow. A reference to
the Tribunal is made by way of a written notice signed by you and filed with a
copy of this Determination Notice. The Tribunal’s address is: 15-19 Bedford
Avenue, London WC1B 3AS (tel: 020 7612 9649). The detailed procedures
for making a reference to the Tribunal are contained in section 103 of the Act
and the Tribunal Rules.
13.2
You should note that the Tribunal rules provide that at the same time as filing
a reference notice with the tribunal, you must send a copy of the reference
notice to The Pensions Regulator. Any copy reference notice should be sent
to Determinations Support at The Pensions Regulator, Napier House,
Trafalgar Place, Brighton BN1 4DW.
Signed: John Scampion .........................
Chairman: John Scampion .............................
Date: 20 March 2006 ..............................
DM No: 524218
8