DP World has been criticised for failing to fill a £146m deficit attributed to its ailing subsidiary, P&O Ferries, in the Merchant Navy Ratings Pension Fund (MNRPF).
The ferry firm owes the largest proportion of the last man standing, multi-employer scheme's overall deficit, but has made no voluntary contributions since its acquisition in 2006 by DP World, which is majority owned by the Dubai Sovereign Wealth Fund and, ultimately, by the Dubai Royal Family.
Voluntary contributions were initially paid by ten sponsors following a 2001 agreement made as part of a division of liabilities among all the sponsors which saw some employers with active members agree to specific payment schedules.
DP World's lack of voluntary contributions is against a backdrop of both awarding dividends to shareholders and being granted two freeport contracts in Solent and London Gateway by the government. Meanwhile, P&O has cut jobs and received government support under Covid loan schemes.
While the scheme is on track to reach a buyout position by 2030, this will rely somewhat on clearing up so-called orphan liabilities - those left behind by prior employers who went bust or who left the scheme before relevant legislation came into force.
Trustee chair John Oldland told Professional Pensions: "The fund is reasonably well-funded, but well-funded doesn't mean we do not have a deficit and that we do not need additional contributions to reach the ultimate goal of a full buyout.
"A big challenge for me and the board is to make sure we treat all of the participating employers as fairly and equitably as we possibly can in terms of picking up deficit contributions, making sure everybody pays what is due."
The scheme's most recent actuarial valuation, dated as at 31 March 2020, found a technical provisions funding level of 93%, up nine percentage points on 2017, with the funding deficit recorded at £96m.
However, P&O Ferries Division Holdings, the specific employer entity within MNRPF, recognised a £146m pensions obligation within its 2020 accounts, the most recent available.
Since a 2015 court case, the scheme's sponsoring employers have been able to choose one of four contribution plans to repay the deficit - allowing a deficit share to be paid all in one go; deferral over three years; deferral over five years, with interest; or a custom arrangement negotiated with trustees.
PP understands that P&O's is one of the longest, and there are potential covenant concerns arising out of the pausing of passenger ferries during the Covid crisis. In June, The Times reported that the firm was fighting for survival.
Around £70m of contributions have been paid by P&O Ferries since 2016, while the outstanding deficit attributed to the sponsor is secured by a guarantee over two of its ships.
But there is increasingly a concern that there could be a race against time to secure the owed funding, avoiding the need to call on other employers to fix the deficit.
The scheme's 100-plus sponsoring employers cover a range of sizes - including small- to medium-sized businesses Geest Line and Isles of Scilly Steamship Company, as well as bigger firms James Fisher & Sons and Bibby Line.
But it also includes government-owned employers, such as the Royal Fleet Auxiliary Service, the British Antarctic Survey, and Orkney Ferries.
The scheme's woes were raised in the House of Commons where shadow pensions minister and Labour MP Matt Rodda said the fund could face "serious problems".
"Despite P&O owing this enormous sum, the government have awarded its parent company two lucrative freeport contracts," he said. "Will the minister explain how on earth the government allowed this to happen? We are getting used to sleaze and cronyism; is this an example of sleaze and cronyism, or is it sheer, unadulterated incompetence?"
Speaking with Professional Pensions, he added: "People work hard all their lives and deserve to benefit from a decent pension. In this case, DP World hasn't made its full contributions to the pension scheme and I would ask the government to review the procurement process it went through when awarding DP World the freeports contract and look at ways of encouraging DP World to make the proper payments that employees deserve."
Asked to respond to the criticism, the Treasury had been unable to provide a comment by the time of publication.
While The Pensions Regulator has powers to impose a financial support direction, or even contribution notice, on DP World or P&O Ferries, PP understands it has not taken this approach.
Such a method was employed with both the Sea Containers pension schemes and the Box Clever case, the latter of which last year resulted in ITV agreeing a contribution plan after over a decade of legal fights.
The case has a number of parallels, not least with the Plumbing Pensions section 75 difficulties, but also with the Stagecoach and Department for Transport legal wrangle, where the transport operator was stripped of its franchise over pension funding issues.
DP World and P&O Ferries declined to comment.