A clothing firm has gone into administration after regulators rejected a request to protect company pension schemes.
Dawson International, which manufactures luxury cashmere garments from a base at Hawick, Scotland, called in the administrators after the Pension Regulator said they would not safeguard the firm’s pensions under the Pension Protection Fund (PPF).
Pension trustees wanted the firm to hand over £50 million by August 19, 2013, to cover a black hole in the company’s defined benefit pension plan.
Dawson offered the PPF a third stake in the business, cash and a loan note.
“The company has striven for many years to reduce the deficits on the plans, making contributions of £2.2 million in the last financial year alone,” said a spokesman. “Despite these efforts, the deficits have widened, mainly due to changes in actuarial assumptions, and associated costs have risen significantly.”
The spokesman added that the regulator considered the proposals put forward by the company did not adequately cover the deficit.
The company argues that the decision is ‘unjust’ and did not fairly consider the points put forward in support of the application, which, said the firm, included:
The regulator and PPF used a different pension buy out calculation than the company which meant the company had to fund a larger deficit
The fund value was £9.4 million higher in March 2012 than a year earlier and stood at £117.7 million
Scheme liabilities are valued by actuaries and the fluctuations in the calculations were beyond the control of Dawsons
Chairman David Bolton said in the end, the company simply had no more money to put on the table.
The PPF’s executive director for financial risk, Martin Clarke, said the offers made by the company were “inadequate”.
“The PPF is here to safeguard people’s pensions if a company goes into insolvency with inadequate pension scheme funding. Our costs are met by all eligible pension schemes in the fund,” he said.
“Sometimes we will let a company continue trading while taking on the pension scheme.
“These are not arrangements we agree without a lot of consultation, and then only if several tough tests are passed. The offers to take on the Dawson pension scheme were not adequate in relation to the size of the deficit.
“Taking a pension in to the protection fund involves applying clear and strict principles that consider how they affect members’ pensions and the costs to other pension schemes funding the PPF.”
The Dawson deficit is thought to be around £129 million. About 4,000 former Dawson employees are collecting pensions from the scheme.