|
19 February 2008
Punter Southall comments on the Northern Rock story from a pensions angle
We thought you might be interested to hear about an additional angle to the Northern Rock story:
the impact this will have on the Northern Rock pension fund? Whilst it is great news for the
trustees of the scheme, as there is currently a shortfall in the scheme, it does throw up some
interesting regulatory anomalies - for example, that schemes can’t ‘self-invest’ in their employer,
but Northern Rock has most of its investments in government bonds!
If this sounds interesting, we could arrange for you to speak with Richard Jones, Principal at
Punter Southall, the actuarial consultancy. He has produced the following written comment as
well:
“
The nationalisation of Northern Rock is excellent news for the Trustees of its pension scheme
which now have the Government standing behind the scheme, removing all concerns over
security which had existed prior to Sunday’s announcement. The potential shortfall in the
scheme, had Northern Rock become insolvent, has been estimated by the Trustees to be £150
million to £200 million.
The Trustees had already moved 93% of its assets into gilts (debt securities issued by the
Government) which would, in effect, be illegal for a private sector scheme as investment in
securities issued by its ultimate sponsor would be considered as ‘self-investment’.
If the nationalisation is only a temporary measure as has been suggested, it will be interesting to
see whether or not the Government seeks Clearance from the Pensions Regulator when
Northern Rock is returned to the public market and the Trustees once again become dependent
on the covenant provided by the bank itself.”
If you would like more information or would like to speak to Richard Jones, please contact:
Penrose Financial
|
