Plenty of business for the PPF by Finance News Bulletin

Published: 16/01/07

The Pension Protection finance (PPF) has taken on 40 insolvent pension schemes in less than a yearIt opened for commerce last April to save pension funds which have been left with holes in their money by insolvent employersLast Friday, the retirement fund scheme of AP Hydraulics, the well-known manufacturer of car brake pedal parts based in Leamington Spa, became the latest to apply to the PPF to be bailed outBut a requirement to begin making higher pension contributions next month, amounting to £2m a year, would have drained it of all its cash and made it not capable to pay any suppliers or staff

"It was pretty obvious to me that a corporation so small would not be clever to make that payment," said Dennis Reed, a trustee of the pension scheme"In piece of information, if the corporation had not called in the administrators, the trustees would have done, as we could see the company couldn't make the payments," he addedAlong with its sister corporation Aptec Technologies, based in County Durham, it is consideration to be the first company it seems that trading solvently that was tipped into insolvency by its pension black holeThere is some good information for the 2,000 members of the AP Hydraulics retirement fund scheme, counting pensioners and former employees who have yet to retire

The administrator of the corporation, Matthew Hammond of accountants PWC, is confident he can sell the businessSo far, he has inward more than 40 expressions of interest and he has been spending his time showing prospective buyers around the corporation and asking them to make firm bids"I'm very confident we can sell the commerce as a going concern We need another month at it before we can conclude," he said

The sale price will not raise anything close to the amount of money essential to cover the outstanding pension fund liabilityBut unusually for an insolvent definite, AP Hydraulics did not owe any money to its banks or other lenders, and outstanding only £1m to various trade creditorsAs the gap in the pension fund has been approximate at about £50m (on what is known as a "buy-out" basis), then the system should receive 98% of any proceeds from the company's salebrake pedal assembly line at AP Hydraulics previously Lockheed) 1947

Photo: Leamington library and AP HydraulicsOnce the company employed 7,000 labour in Leamington alone and it was part of a much larger international groupAs the company has now been shorn of its retirement fund fund problem, it should be more attractive to a new proprietorAccording to Dennis Reed, the firm has good forecast: "The company has a lot of new business pending in, it is starting to grow and we are thinking of captivating on more employees in 2007"Firms like Land Rover, LDV vans, London Taxis International and Morgan cars all employ its brake parts, including calipers and hoses

These major customers have been very supportive, according to Matthew Hammond, serving to stabilise its trading positionAs these brake pedal parts are such critical devices, Hammond is hopeful a trade buyer will emerge from within the railway wagon industryWhile Matthew Hammond is full of activity trying to sell the AP Hydraulics business, the PPF is about to decide if it should attempt to rescue its pension schemeCan the scheme be rescued, perhaps because a buyer of the insolvent boss is willing to take on the pension scheme too

And are the possessions of the retirement fund scheme still high enough to make payments that are at least equivalent to the security net level offered by the PPFIf the reply to both questions is no, then the scheme will go into what has been dubbed the "investment pen", along with the 40 schemes the PPF has already decided to take onAmong them have been the pension schemes of MG Rover, Sheffield Forgemasters, Wiggins Group, upland Poultry and Tomkinsons CarpetsIf the PPF accepts the AP Hydraulics scheme for appraisal, that will mean a thorough appraisal of its finances

PPF spokesman Paul Reynolds said this would reflect the bankruptcy process at the firm "We will identify all scheme members - there will be a group of data cleaning We will also make sure there has been no fraudulent action"That process will last at least 12 months, so no scheme has been completely absorbed into the PPF

As a result, it has yet to take on formal responsibility for paying any current and future pensionersSo for the occasion being, the scheme trustees stay in their work, paying out pensions to pensioners, although anyone who retires from the insolvent schemes now will only get 90% of their usual pension - the same as the PPF's safety-net levelIn due course, though, as the PPF takes on full responsibilty for schemes that have gone bust, it will grow into one of the biggest private division pension providers in the country, responsible for paying out to tens of thousands of present and prospective pensionersAnnuity reform Women 1 Women 2 Pension human rights Divorce labour pensions Lump sums Pension Credit Frozen pensions Shortfalls Overseas pension Small pensions Tax and pensions retirement fund repair Made simpleState pension With-profits last salary Money purchase Annuities Serps State Second

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