Vacuum icon Hoover has ditched its £500m retirement scheme into the pension lifeboat after getting the green light from the UK pension regulator.
The pensions watchdog used enhanced powers for the first ever time to sign-off on the fact Hoover had no choice but to cut its pension scheme adrift.
The Pension Protection Fund (PPF) will be responsible for Hoover’s 7,500-member strong final salary scheme.
Owned by white goods firm Candy, Hoover said it would be bankrupt within 12 months if it continued to be responsible for pension payouts. In such extreme circumstances The Pensions Regulator (TPR) has the power to agree a deal to allow the scheme to fall into the PPF.
But for the first time TPR engaged a so-called “skilled person”, in this case accountants from KPMG, to sign off on the fact that Hoover would become insolvent under the burden of the scheme.
As part of the deal Hoover will put £60m of cash into the scheme before cutting its ties.
In addition, it will hand over a 33 per cent “anti-embarrassment” stake. This means if Hoover’s financial fortunes were to turn round, the pension scheme would benefit through its shareholding.
“We do not agree to these types of arrangements lightly but in this case we believe it is the right outcome for scheme members and the PPF,” said Nicola Parish, TPR’s executive director of frontline regulation.
Today’s agreement is called a regulated apportionment arrangement (RAA). It is only the first such deal to be agreed in 2017, only the second in the last two years and one of around 30 to have ever been agreed.
Parish said: “This type of pension restructuring is rare, and will only be agreed in accordance with our published guidance, so that RAAs are not abused by businesses seeking to offload their pension liabilities.
We insisted on clear and extensive evidence to show that Hoover would inevitably fall into insolvency without a restructuring of its pension arrangements.
Hoover operates in the UK simply as a distributor of Hoover and Candy products, which are made overseas. It currently employs around 500 people but its pension scheme dates back to the days when thousands of people were employed in manufacturing factories in Merthyr Tydfil and Glasgow.
A spokesperson for the PPF said: “We have been working with the pension scheme, Hoover and The Pensions Regulator to reach an agreement which meets our restructuring criteria. In consenting to the transaction, we were confident that our tests have been met, and that the deal provides a better outcome for levy payers than would have been achieved through the normal insolvency process.
“It is expected the Hoover pension scheme will enter a PPF assessment period and members can be reassured we are there to protect them.”