The Kodak Pension Plan 2 was set up in 2013 under a mechanism known as a Regulated Apportionment Arrangement (RAA). This arrangement allowed Kodak to sever ties with their 15,000 members pension fund due to financial difficulties following the Chapter 11 bankruptcy filing by Eastman Kodak (the US parent company) in 2012.
What does this mean?
To avoid the scheme being tipped into the Pension Protection Fund (PPF), the deal allowed the trustees of the Kodak UK Pension Plan to buy Alaris (Kodak’s document & personal imaging business) for $650m in cash from Eastman Kodak. The expectation was that the cash flow from the business would support the scheme and help fund the pension commitments albeit at reduced levels.
However, PwC recently carried out a detailed review of the Alaris investment prompting the Kodak Pension Plan 2 trustees to write to scheme members in September of this year. The trustees informed members they would likely to be transferred to the Pension Protection Fund (PPF) as the Kodak Alaris businesses would not produce sufficient returns in the long term to meet the needs of the Plan.
The UK Pension Regulator is now facing criticism over the deal, which was considered unusual and quite rare when approved. When the RAA deal was agreed, recent figures provided by the PPF revealed the Kodak scheme’s deficit was £900m. By 2017, the deficit had grown to £1.5bn resulting in a potential additional cost of £600m to the PPF and companies who pay the levies.
Should I be concerned?
This is quite a unique situation whereby the Kodak Pension Plan 2 owns the Alaris business and it is an asset of the scheme. The trustees are currently looking at possible options to either sell all or part of the company if an attractive arrangement can be made. Alternatively, the company could become an asset of the PPF as and when the pension scheme moves over.
The trustees are currently in discussions with the Regulator and the PPF and have recently released their Winter 2018 update, which states the following;
“It now seems that moving into the PPF is inevitable. While we don’t yet know when the move will happen, it is likely to start in a matter of months – probably by 31 March 2019. We’ve included some information about what this means for members, which should help you see how you personally could be affected.
As your trustees, we are continuing to work with the Pensions Regulator and the PPF to resolve the Plan’s future. If time allows, we will write to you again in the new year, when we hope to be able to tell you the exact date when the Plan will start moving into the PPF – known as the PPF assessment date. If the process moves faster than that, the next communication you get may be at the beginning of the PPF assessment period.”
Latest news and updates can be found here.
What can I do?
First of all, speak to an adviser to discuss your own unique position. We take a fully holistic approach to finding the best solution possible for your current and future requirements.
Transferring your pension out may also be an option. However, any defined benefits pension will be subject to scrutiny before being allowed to transfer and rightfully so. The transfer process is not that complex, but can take considerable time. Bearing in mind the probable deadline, the first step should be to speak to an Independent Financial Adviser.
To find out more about your personal pension position, contact Harrison Brook today to speak with an advisor to discuss your options. Harrison Brook is a cross-border pension transfer specialists and we can explain and assess the options available to you. Through our detailed analysis, we will take you through the process of gaining valuations up to placement into a suitable solution.