No decision on collapsed builder’s £90m pension black hole until landmark court case is over
Former workers at collapsed builder Rok must wait until the conclusion of a landmark court case to find out whether the government will help fill the £90m pension black hole uncovered by the company’s administrator.
A report by administrator PricewaterhouseCoopers (PwC) said the bulk of the deficit was in the company’s two main defined benefit pension schemes run by Rok Building and Rok Development for its 3,800 staff.
The news means Rok’s former and current workers may face huge short falls in their pensions because as a creditor, pension schemes rank behind the claims of secured creditors, most notably Rok’s banks which are owed about £75m.
The scheme may end up in the Pension Protection Fund, which may safeguard up to 90% of employees entitlement up to a maximum of £25,000 a year.
Alternatively the Pensions Regulator may issue a financial support direction (FSD), a move that would recognise the pension shortfall as an expense of the administration and give it priority over all other creditors, including the banks.
But FSDs are currently the subject of a legal dispute between the regulator and the administrators to Lehman Brothers and Nortel.
The appeal by the administrators in the Lehman/ Nortel case is expected to be ruled on in October or November. A defeat for the regulator could downgrade pension deficits in administrations.
Joint administrator Jeremy Webb said no decision about Rok’s pension scheme can be made until the court makes its decision.
He said even if in the event of a successful ruling for the regulator, Rok does not have the funds to meet the deficit.
The steps to rok’s downfall
June 2010: Connaught issues a profit warning.
July 2010: Connaught chief executive Mark Tincknell resigns
August 2010: Rok reports “serious failings of financial control” in its plumbing, heating and electrical division and suspends finance director Ashley Martin
September 2010: KPMG appointed Connaught administrators Rok lifts the suspension of Martin, who resigns
November 2010: PwC is Rok joint administrator