UK - Talks between beleaguered bank Northern Rock and the trustees of its pension scheme have broken down amid "fundamentally different" views of how the scheme should be invested.
The vast majority (93%) of the scheme's assets have been invested in gilts, bonds and cash, with "small holdings in property and private equity" to safeguard the existing investments.
Sir David conceded this would have a knock-on effect on the expected investment results of the fund, as it was a "low risk and therefore low expected return" strategy.
The company was said to have pushed for a more risky investment strategy, including equities and corporate bonds, but the board of trustees felt this would cause significant risk to the company's recovery plan.
It is expected the continuing negotiations will be passed to the Pensions Regulator (tPR) for arbitration as "it is difficult see how [a settlement]will be possible without the active involvement of tPR".
Sir David also mooted the possibility of passing the scheme to the Pension Protection Fund (PPF) but said this was unlikely, with a scheme buyout a preferable option in this case.
He said preliminary investigations into a possible buyout had been carried out, but the trustees would prefer to wait until the company workforce had stabilised following the completion of corporate downsizing and redundancy exercises.
Sir David added the value of investments was £350m, which was about £40m more than would have been achieved if no action had been taken to restructure the fund.
Northern Rock also posted its first half financial results, which showed a £585m (US$1.14bn) loss.
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