David Cameron says that the coalition government wants every company to provide a pension scheme for employees; that way we will all be compelled to save wisely for our futures. But is entrusting our savings to private corporations sensible? Thousands of former milkmen would certainly say no.
Tucked away on the business pages last week were reports of the curious case of Uniq, a company that sold itself to its own pensioners. The company couldn't afford to pay full pensions to its former employees and rather than go bankrupt gave 90% of its shares to its pension fund. That way the company would survive and the pensioners would get something, but still a lot less than they were due.
There is nothing new in companies getting into financial difficulties and being unable to honour their pension obligations. But the Uniq case was different and throws a spotlight on fundamental flaws in modern corporate capitalism.
Uniq is a company hardly anyone has heard of but it is the rump of a former FTSE 100 giant, Unigate. Unigate was formed in 1959 by the merger of United Dairies and Cow & Gate. It dominated the British dairy industry and diversified madly, for example owning a chain of restaurants in the United States and a large transport firm based in Somerset. But conglomerates went out of fashion and Unigate was dismembered. Dairy Crest bought much of the milk and cheese business. Cow & Gate became part of Danone. The transport business, Wincanton, was floated on the stock exchange. What was left was a company of 2,200 people re-named Uniq and dedicated primarily to making sandwiches for M&S.
What was also left was a massive pension liability. Although some of the old Unigate pension liabilities had been transferred to Wincanton the rest remained with Uniq. A company of 2,200 was expected to fund the pensions of 21,000 people, milkmen and others who had loyally served the Unigate conglomerate and expected to have reasonable pensions to carry them into retirement. Those expectations have been dashed.
The Uniq case raises interesting questions about pension protection regimes and the role of the state in regulating and perhaps insuring company pension schemes. To use the unavoidable pun Uniq is not unique. British Airways, for example, has been described as a pension hole with a few planes attached. But the case also raises far more profound questions about the role of corporations in society
The £436m deficit in Uniq's pension fund did not suddenly appear from nowhere. It arose in large part from the way the Unigate conglomerate was dismembered. Successive highly paid management teams along with even more highly paid investment bankers and lawyers (and presumably actuaries) structured a series of deals that left a relatively tiny sandwich maker saddled with enormous pension commitments. Cynics might argue that this may well have been deliberate but even if the depleted pension fund was just “collateral damage” it must surely imply that the rights of pensioners were not a priority for those working on the deals.
The companies who were able to buy Unigate's assets without taking on the accompanying pension liabilities have done very well. That points up an underlying moral issue in the Uniq case. The pensioners will lose their benefits even though the money is there to provide them. Danone is a major French multinational. Dairy Crest and Wincanton are FTSE 250 companies. They could afford to pay for the milkmen's pensions but they have legally binding contracts that say they don't have to – contracts that the pensioners were not party to.
It is a scandal, but one that has gone almost completely unremarked. Financial journalists have speculated about the effect of Uniq's pension proposals on the company's share price, on the company's management and more generally on the problem of funding corporate pension obligations. What has been missing is any consideration of how the situation has arisen, how it could be stopped from happening again and how the pensioners' position could be rectified: all issues a political journalist might have investigated had we been talking about state pensions. Pension provision, like so much else in our society, has been moved from the public sphere to the corporate sphere where it will disappear from sight behind the corporate burqa. The actions of corporate executives have as much impact on individual lives as the actions of politicians and civil servants but as they are part of the “private sector” we subject them to minimal scrutiny.
What Uniq demonstrates is not just that pension provision in this country is a shambles but that issues of fundamental concern to millions of citizens simply do not enter the arena of political debate.
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