Cincinnati Machine Pension Plan · CAS-83696-J1X7

CAS-83696-J1X7

Ombudsman’s Determination Applicant Mr E

Scheme Cincinnati Machine Pension Plan (the Plan)

Respondent The Board of the Pension Protection Fund (the Board)

Complaint Summary I have received a reference of a reviewable matter following a decision by the Board’s Reconsideration Committee dated 22 October 2021. The reviewable matter concerns the Board’s approval of the section 143 valuation of the Plan. Mr E says that the insolvent employer’s wider corporate group (the MAG Group) should fund the Plan, so that his pension is provided in full and outside of the Pension Protection Fund (the PPF).

Mr E has also raised a complaint of maladministration concerning the Board’s handling of his complaint. He says that the Board: delayed in responding to correspondence; failed to supply him with information he requested; and operated an inadequate Secure Mail System.

Summary of the Ombudsman’s Determination and reasons

1 CAS-83696-J1X7 Detailed Determination Material facts

“All pension benefits earned prior to 28 August 2006, including deferred pensions for ex employees, are protected and will become payable in the normal way. Although the current employees will no longer be able to contribute to the Cincinnati Machine Pension Plan, the Company’s1 contributions will continue, in order to ensure all benefits are paid in full. … The change has no impact on individuals who left Cincinnati Machine Limited prior to 27 August 2006. Unless you decide to transfer your pension benefits to another pension plan, your pension benefits will become payable at retirement in exactly the same way.”

1 Cincinnati Machine Limited.

2 CAS-83696-J1X7 (i) Released MAG Maintenance UK Limited from its obligation to pay:

• a substantial part of intercompany loans with MAG Europe and MAG IAS LLC (MAG US); and

• deficit reduction contributions for 2012 to the Plan.

(ii) Secured a debenture for the Trustees, granting them fixed and floating charges over MAG Maintenance UK Limited’s assets should an insolvency arise (the Debenture).

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2 A valuation obtained in accordance with the Board’s obligations under section 143 of the Pensions Act

2004. 3 Cincinnati Machine UK Limited.

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4 As at April 2003.

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Summary of Mr E’s position

23.7.

Summary of the Board’s position

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Conclusions

Complaint of maladministration

The Board has confirmed that Mr E’s complaint of maladministration has not been through its complaints process. My jurisdiction to consider relevant complaints of maladministration is provided under The Pension Protection Fund (Investigation by PPF Ombudsman of complaints of maladministration) Regulations 2005 SI 2005/2025 (the PPF Ombudsman Maladministration Regulations).

A relevant complaint of maladministration can be referred to me following a decision by the Board on the matters complained of where either: the Reconsideration Committee has given a decision on those matters; or an application has been made to the Reconsideration Committee and the Reconsideration Committee has not given its decision within the statutory deadline or there is no real prospect of the Reconsideration Committee doing so.

There is no indication from the available information that these conditions for the referral of a relevant complaint of maladministration have been met. Therefore, in accordance with the PPF Ombudsman Maladministration Regulations, I have not accepted the complaint of maladministration for investigation and I do not make any findings on the complaint of maladministration in this decision.

5 https://www.mtsq.co.uk/.

9 CAS-83696-J1X7 Reviewable matter

Mr E says the wider MAG Group should fund the Plan, so that his pension is provided in full and outside of the PPF. He says his view is supported by:

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The September 2008 Written Resolution, authorised by MAG International, appointed two directors of Cincinnati Machine Limited, and Cincinnati Machine Limited subsequently appointed two employees of MAG International as trustees of the Plan. Neither event imposed a legal obligation on MAG International to fund the Plan. I agree with the Board’s submissions that it is usual practice for a company’s shareholders to have the power to appoint directors of that company, and the Written Resolution and Cincinnati Machine Limited’s subsequent appointment of two employees of MAG International did not constitute a legally binding commitment for MAG International or other entity within the wider MAG Group to fund the Plan.

Mr E says the 2012 Trustees’ Report gave “solid information” that the MAG Group was involved and that members’ pensions were “sound after changes”. He says there is no mention that TPR was involved in these changes.

The 2012 Trustees’ Report informed members that MAG Maintenance UK Limited had approached the Trustees in 2011. It stated that MAG Maintenance UK Limited had explained that a major restructuring of MAG’s European operations was likely to result in it becoming a stand-alone business, so it was necessary to strengthen its financial standing if it was to secure its long-term future. The company advised that it had taken steps to secure an agreement with MAG Europe and MAG US to release it from significant debts owed to both entities and to strengthen its negotiating position it had asked the Trustees for relief from pension contributions to the Plan during 2012.

The provision of financial support to MAG Maintenance UK Limited by the wider MAG Group does not, in itself, indicate that the wider MAG Group assumed responsibility for the Plan’s deficit.

The Trustees’ Report advised that after consulting with their lawyers, pension consultants, the Plan actuary and TPR, the Trustees negotiated an agreement with MAG Maintenance UK Limited which modified the employer’s contributions to the Plan and secured the Debenture for the Plan. The Trustees expressed their view that the agreement and the objective of securing the company’s long-term future was in the best interest of the Plan members, and that this view was supported by their advisors.

I note that TPR was aware of these negotiations, and it did not exercise its regulatory powers in respect of the Plan funding arrangement. The Debenture granted the Trustees a fixed and floating charge over MAG Maintenance UK Limited’s business and assets should it become insolvent. The Debenture did not concern the wider MAG Group.

Mr E says he is concerned that many pensioners have been misled and will not receive the pension they are entitled to and have worked for. He says that MT 11 CAS-83696-J1X7 Squared Limited was reduced to a service company, its assets sold cheaply with no intention of keeping it running, and the assets were sold to form a new company using the same website, phone number and engineers of MT Squared Limited. He also refers the appointment of a “single super trustee” in relation to the Plan and the shredding of all Plan documents held by the former Trustees.

I have not found any person or entity in relation to the complaint who has been appointed into a role known as “single super trustee”. To the extent that Mr E may be referring to the appointment of a corporate trustee in respect of the Plan, as noted at paragraph 18 above, Dalriada Trustees was appointed as the Plan Trustee at the time the Plan entered the PPF assessment period. There is no indication that the appointment of trustees for the Plan had any impact on the scheme employer’s funding responsibilities or is relevant to the question of whether MT Squared Limited is the scheme employer. I have seen no evidence of blanket shredding of important documents, and copies of all documents which have been referred to were provided to me. Nor have I seen evidence that Mr E has been misled.

Neither Dalriada nor the Liquidator has identified any untoward transfer of assets from MT Squared Limited prior to its insolvency. To the extent that the sale of MT Squared Limited’s assets may be relevant to the question of who the sponsoring employer of the Plan is, there is no indication that the purchaser of MT Squared Limited took on the responsibility for funding the Plan. The Board has stated that the purchaser of MT Squared Limited’s assets would not have assumed any liability to fund the Plan. I find that there is no evidence to dispute this submission and it is not necessary for me to consider any wider issues regarding the purchase.

There is no evidence that MAG International or other entity within the wider MAG Group is responsible for funding the Plan. There is no evidence that the Reconsideration Committee’s decision regarding the sponsoring employer responsible for the Plan was reached incorrectly. The Reconsideration Committee reached a reasonable conclusion, having considered all the matters that Mr E raised in respect of its decision. There is also no evidence to discredit the Board’s decision to approve the section 143 valuation of the Plan.

Anthony Arter

Pensions Protection Fund Ombudsman 20 October 2022

12 CAS-83696-J1X7 Appendix The Plan Rules

(a) the Old Principal Employer shall be released from all obligations in relation to the Plan which apply to it other than as an Employer; and

(b) the Rules and all other provisions of the Plan shall take effect as if the New Principal Employer had been and is the Principal Employer.”

Deed of Amendment, 3 April 2005

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6. The New Principal Employer and the Trustees release the Old Principal Employer from all liability in connection with the Scheme whether suffered or incurred before, on or after the date of this deed and whether arising under the provisions of this deed or the Rules, under statute or otherwise to the maximum extent that they are able (including, without limitation, any liability under section 75 of the Pensions Act 1995) and the New Principal Employer will indemnify the Od Principal Employer in relation to any such liability to which the Old Principal Employer is or becomes subject not withstanding this release.

7. The New Principal Employer covenants to the Trustees that it assumes and undertakes that it will perform and discharge any liability in connection with the Scheme which is the subject of clause 6 and any other liability of the Old Principal Employer in connection with the Scheme.”

The 19 April 2012 framework agreement

6 MAG Maintenance UK Limited. 7 MAG IAS LLC. 8 MAG International Industrial Machinery S.a.r.l. 9 MAG UK, the Plan Trustees, Lux 4 and MAG US.

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Extract from 2012 Trustees’ Report

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