GMB call on Pensions Regulator to investigate role of AA pension scheme trustees

GMB, the union for staff in the AA, are calling on the Pension Regulator to investigate whether trustees have behaved in a correct and proper manner as the pension deficit rises to reach £622m. GMB believe that the trustees role should be examined, particularly around the area of ‘conflicts of interest.’

Earlier this month GMB called for the Pensions Regulator to examine the role played by previous owners which is impacting on the current pension deficit of £622m. The AA pension deficit is now one of the largest pension deficits as a percentage of equity capital among FTSE 250 companies.

With net debts of £2.8bn and a pension deficit of £622m, nearly twice as much as that of the BHS pension deficit of £345m reached on Philip Green’s watch, the role of the trustees must be rigorously investigated.

Paul Grafton, GMB regional organiser said, “The role played by the AA pension fund trustees at the time the deficit has ballooned to £622m must be rigorously investigated and scrutinised in detail by the Pensions Regulator.

As the BHS pension deficit under Philip Green’s watch is being put under a spotlight, so must the AA deficit which is nearly twice as much. Politicians are demanding that Philip Green uses some of his personal fortune to plug the BHS pension shortfall.

GMB question whether the trustees have been properly proactive in protecting the fund while money has flowed out of the organisation to the private equity owners and in interest payments to cover the debt mountain they landed on the organisation.”

Contact: Paul Grafton on 07714 239092 or Paul Maloney on 07801 343839

Notes to Editors:

1 Key duties of Pension trustees

Act in line with the trust deed and rules – these documents tell you what powers you have and the procedures you must follow
Act prudently, responsibly and honestly – when deciding whether to exercise a power you must consider the circumstances impartially
Act in the best interests of your beneficiaries
Act impartially
A trustee is responsible for contributions; financial records and requirements; investment; professional advisers and service providers; pension scheme records; members; registration, scheme return and collecting levy; reporting certain matters to the regulator
Further details on the role of a trustee can be found on The Pensions Regulator website: www.thepensionsregulator.gov.uk/trustees.aspx

2 Letter sent to regulator

Dear Ms Titcombe,

Automobile Association Ltd (The AA)

Following on from my letter dated 7 October 2016 more information seems to be coming to light and I thought it appropriate to inform you of this.

Firstly, the AA pension scheme deficit was £67 million in March 2004 according to the actuarial report supplied to GMB members around this time, a copy of the document is attached. It is important to note that 2004 was prior to private equity taking over the business.

Secondly, I have also attached paperwork that shows the Pension deficit continually rose from £87m in 2010 to £341m in 2015 and further escalated to the current £622m as it stands today. This was despite guarantees from the AA to tackle the debts by adding a further £20m per year.

The continual rise in deficit is currently being blamed by the AA as a “Brexit” created problem when in fact these deficits had already grown to epic proportions and unsustainable levels. This appears to have never been raised and dealt with by the Trustees bringing in to question if there is a substantial conflict of interest. The AA pension deficit is almost double that of the BHS Scheme that collapsed when under the control of Phillip Green.

I would urge the Regulator to undertake an immediate and vigorous investigation, not only of the handling of the pension scheme, but also the potential conflicts of interest the Trustees may have. No alarm bells have been sounded by the Trustees considering they would have been aware the AA is in financial difficulty.

Yours sincerely
Paul Grafton, GMB Regional Organiser

3 GMB Press Release dated 6 October 2016
GMB CALLS ON THE PENSIONS REGULATOR TO INVESTIGATE THE AA PENSION SCHEME AS DEFICIT HAS BALLOONED TO £622 MILLION
The role of those that sucked money out of the AA, like Tim Parker, Damon Buffini and Charterhouse, must be scrutinised in detail says GMB

GMB, the union for staff in the AA, are alarmed that the AA’s defined benefit pension schemes liabilities have ballooned to £622m at the end of July 2016. The Pensions Regulator must examine the role played by previous owners which is impacting on the current pension deficit. (See notes to editors for link to AA plc Interim report)

GMB has been warning for years of the draining of money out of the AA since it was acquired by private equity owners in 2004 when CVC and Permira acquired it from Centrica in a £1.75bn deal. When the AA and Saga (owned by private equity company Charterhouse) merged in 2008, Andrew Goodsell, Saga Chief Executive, received £104m and Tim Parker, CEO of the AA received around £40m. Private Equity bosses shared a £1.7bn windfall after the merger with CVC Capital Partners, Permira Advisers and Charterhouse General Partners sharing the payout.

Paul Grafton, GMB regional organiser said, “This ballooning pension deficit needs to be examined and the role of those that sucked money out of the AA, people like Tim Parker and Damon Buffini and companies like Charterhouse, must be scrutinised in detail. The Pensions Regulator must examine the role played by previous owners and get them to put some of the billions they made back into the AA workers pension pot.

The BHS pension deficit reached £345m on Philip Green’s watch, just over half of the current AA pension deficit, and played a prominent role in the work and pensions select committee and the business, innovation and skills (BIS) committee investigation into the BHS collapse. Politicians have demanded that Philip Green uses some of his personal fortune to plug the BHS pension shortfall.

GMB will be looking into the role of the pension scheme trustees and whether they have been properly proactive in protecting the fund while money has flowed out of the organisation to the private equity owners and in interest payments to cover the debt mountain they landed on the organisation.”