The UK Coal Pension Scheme has entered the Pension Protection Fund (PPF) after its sponsors UK Coal Mine Holdings and UK Coal Operations went into administration.
UK Coal said in a statement it had worked closely with the PPF and its advisers to develop an innovative restructuring plan, which secures 2000 jobs and provides protection on accrued pension benefits for employees by transferring the scheme into the lifeboat fund.
Under the plan, the viable mining operations have been restructured and their assets will now be held in individual companies owned by a new business which will operate as UK Coal Production Ltd. The new company will be owned by UK Coal Mining Holdings – a new parent company to the group.
The PPF will not own the new company, but its interest in it will consist of a series of debt instruments.
PPF executive director for financial risk Martin Clarke said: “It means that pensions have been protected, the company can continue trading as a going concern and that 2000 jobs have been saved from an uncertain future.
“By taking on the scheme, we will now protect the pensions of its 7000 members and they will receive PPF compensation, either now or in the future, to provide them security in retirement.
“The agreement also means that we will receive regular payments from the company which we expect to produce a higher return in the long run than if the company had simply been allowed to collapse into insolvency. This is good news both for our members and our levy payers.”
UK Coal said about 50% of the current workforce are members of a defined contribution scheme and their contributions will not be affected by this administration and restructuring. Also unaffected are pensions accrued prior to privatisation in 1994.
However, members of the Industry Wide defined benefit pension schemes will see their post privatisation pension administered by the PPF. Equivalent new pension arrangements will apply for retained employees.
The insolvency has developed following a fire that closed the Daw Mill deep mine in March 2013. Production of coal from Daw Mill represented around a third of UK Coal’s revenue and the forced closure of the mine has forced both UK Coal Mine Holdings and UK Coal Operations into administration.
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