UK - A shock u-turn by Danish shipping giant Maersk to pay the full pensions of employees hit by its final salary windup has scored praise from the industry and has been hailed as a victory for workers caught in similar closures.
The move marks the end of a year-long battle between Maersk, regulators and around 200 Sea-Land Services Inc Pension Plan members.
Ros Altmann, independent adviser on pensions policy, described the move as a “call to action for trustees and employers” and would help to re-establish confidence in the occupational pensions system.
“Employers had accepted that if your company was insolvent you could just walk away from pensions without making up the difference. This [move] has shown that pressure can force management to put money back.”
Altmann believes that the Maersk’s action may not only set a precedent for other schemes but may induce a change in the law.
“The government should now try to ensure that other employers who have short-changed their employees in the same way are forced to make up the difference,” she added.
On June 11, the government announced new wind-up measures which require employers to fund up to the Minimum Funding Requirement (MFR) level. The rules have come under fire for having no retrospective effect and have led many employers to regard the MFR limit as a payment loophole.
“It [the government] should introduce regulations to allow all trustees to unwind‚ the wind-up procedure and force employers to run the scheme as a closed fund. The scheme would be obliged to pay full pensions as they become due, for existing pensioners, and all other members as they reach retirement age... ”, said Altmann.
But Maersk stressed that its decision was voluntary and not influenced by outside pressure.
“The Maersk Company believes that ensuring all members receive their full pension entitlements is now the right thing to do, to take account of the spirit and intention of the proposed new measures,” it said in a statement.
Maersk - the UK division of Danish AP Moller Maersk Group - estimates that the cost of ensuring a full buyout of the scheme and meeting accrued entitlements stands between £4.5-5m.
Malcolm McLean, chief executive of pensions advisory group OPAS, reckoned that the climbdown was largely due to the adverse publicity surrounding Maersk over the past year.
“We welcome this decision. .... Maersk are now meeting their moral obligation, although it is rather late in the day,” he said.
But he does not believe that the government will introduce a retrospective clause within existing legislation.
Katherine Dandy, litigation partner at London law firm Sackers & Partners who represented Maersk for free, said that she was “thrilled” with the decision, but added that any precedence set was done so by the decision from the pensions regulator, OPRA, to appoint an independent trustee to Maersk against the company’s wishes.
“The willingness of OPRA to intervene and appoint an independent trustee to a [solvent] board is a new exercise of power for OPRA and one that trustees should be wary of.”
The Sea-Land plan was wound-up last year, meaning that members could have lost up to 60% of their pension entitlements. The plan became the responsibility of Maersk when it was acquired through a business takeover.
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