In his many meetings with Sir Philip Green, the head of restructuring and insolvency at the UK’s pension lifeboat says there was never any raised voices. And certainly no swearing.
But, insists Malcolm Weir, there is no way Green would have come to the table and reached a settlement on BHS had it not been for the actions of the Pension Protection Fund (PPF).
The PPF was launched in 2005 in the wake of a number of high profile pension failures. These included the scandal surrounding Robert Maxwell and his plundering of £440m of Trinity Mirror staff retirement savings; and the collapse in pension giant Equitable Life.
Any UK firm with a “gold-plated” final salary scheme pays an annual levy to the PPF. In return, if a company fails, its retirement scheme – and associated assets – are transferred into the lifeboat. The PPF is there ensure corporate pension promises will be honoured, albeit at slightly reduced or capped levels.
In aggregate, the retirement schemes to have fallen into the PPF puts them in the top five largest pension fund managers in the UK.
Weir heads up the most high-profile team at the PPF, the division that goes into battle with the execs of bust firms. His responsibility is to maximise the returns of claims against an insolvent company. Along with the levy, such returns fund the pension payout responsibilities the PPF has taken on.
“We are very often the largest creditor,” he says. “We are essentially like their bank and we expect to be treated like their bank.”
Weir admits the hardest negotiation during his four years at the helm was with Green. The PPF had huge concerns about being cut out of conversations between the retail magnate and administrators Duff & Phelps. It was for this reason that the PPF decided on a groundbreaking approach to flex its muscles and demand rival FRP Advisory was brought in.
We were concerned that there were issues that needed looking into and we felt that a totally independent pair of eyes needed to look at those… We felt it needed someone unconnected.
A former restructuring banker at Barclays, Weir and his crack team have “20-odd years” of insolvency and turnaround experience each.
He explains the problem with many UK directors is they are not prepared to accept their business is on the path to failure – and this is despite a spate of companies falling into administration under the weight of pension shortfalls.
"What is meant to happen is that an employer realises they are going to go bust. But if they can do something with the pension scheme, then there is a reasonable prospect of them surviving.
So what they are meant to do is to work up a proposal to deal with the pension scheme, looking at the guidelines that we and the regulator have put out there. Agree that with the trustees, bring that proposal to the pensions regulator who will then contact us. And we will say whether we like it or not.
Now that’s the theory of how it should work; it never does actually work that way.
However, Weir explains, there have been cases of companies being too much on the front foot.
“What we are not out doing is encouraging anyone into pensions dumping.
We did see a small spate of people trying that on when they realised that they had a very expensive commitment, which they’d rather not have.
“The ones we have seen were predominantly been foreign-owned companies. Where people have bought a UK subsidiary with eyes open, knowing it had a pension scheme. It was mainly a couple of years ago. Times were hard and then suddenly they thought: ‘That’s quite expensive and that would be quite nice not to worry about anymore.’”
Weir is tight-lipped on the names of the firms involved.
Putting a time limit on the inevitability of insolvency is unhelpful, says Weir.
“You can see something’s going to fail, perhaps two, three years out,” he says and if this is the case urges firms to come engage first with the Pensions Regulator, which will, in turn, contact the PPF.
He says it will only count against a company if the directors are trying it on and do not really think the company is heading towards a doomsday scenario.
“We can work out whether somebody’s pulling the wool over our eyes or not on the insolvency point.”