Evidence submitted to an influential committee of MPs has highlighted concerns over the fate of the Bernard Matthews' pension scheme which has been a casualty the turkey company's pre-pack administration.
According evidence submitted by Professor Prem Sikka, Bernard Matthew's administrator Deloitte "carefully crafted" a strategy to "dump" the pension scheme. He has reported his findings to the Work and Pensions Committee on the turkey farmer's pre-pack sale to "chicken king" Ranjit Singh Boparan.
His analysis also questioned the UK's insolvency laws, suggesting that "a fundamental rethink" was required. Sikka said of Bernard Matthews: "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."
The assets of Bernard Matthews were bought by Boparan, whose business empire includes restaurant chains Giraffe and Harry Ramsden's, in September for £87.5m. According to the report, £85.6m of the proceeds were used to pay the business' secured lenders, including loans from owner Rutland Partners.
Sikka said that prior to the sale there had been "no discussions with unsecured creditors" such as the pension trustees.
The Bernard Matthews' pension scheme, which was in deficit by £17.5m, will now fall into the government lifeboat, the Pensions Protection Fund.
Deloitte did not comment specifically on Sikka's findings but Dan Butters, who acted as lead administrator for Bernard Matthews, reaffirmed his rationale for the sale mechanism: “The sale secured the future of the business with its resulting trading and employment opportunities in the region.”
Read more: Bernard Matthews in hunt for £10m rescue
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.
R3, an association representing business recovery professionals, refuted the idea that administrators could collude with secured creditors to the detriment of unsecured creditors such as pension scheme.
"After an insolvency, practitioners have to repay money to creditors according to a strict hierarchy set out by the government. The creditor hierarchy does include provisions to ensure unsecured creditors – like pension funds – see some money back if there is otherwise not enough to go around," said Adrian Hyde, vice-president of R3.