The sudden redundancy of hundreds of P&O ferry workers, sacked by the Dubai-based owners of P&O who cited the operator’s viability, has unions and MPs in its grip. How are P&O’s pension schemes structured – and is there a risk that scheme members are targeted by pension scammers? 

 

News that P&O Ferries had sacked all 800 staff members via video call at no notice and without consultation, replacing them with low-paid international agency workers, sent shockwaves through the UK and seemingly took ministers by surprise. 

 

While parliamentarians are voicing their discontent and the RMT union is organising protests – having called for talks with the owners of P&O in vain – concerns are growing over the ferry operator’s defined benefit pension schemes and its members. 

 

 

According to DP World, the Dubai-based logistics firm that owns P&O Ferries, it has obligations in relation to four DB schemes. The largest relates to the ports business, but the ferries business is linked to the other three – the P&O Ferries Pension Scheme, the Merchant Navy Officers’ Pension Fund and the Merchant Navy Ratings Pension Fund. The Ferries scheme was just 78% funded in 2019, with a $77m deficit and a recovery plan running until 2030. 

 

The fact that P&O is in two multi-employer funds means that – if the ferry operator ever became insolvent – other employers could be on the hook. For the £3.3bn MNOPF, this is currently unlikely as it was 102% funded in 2021, carrying a £58m surplus.  

 

The MNOPF said: “Following the news on Thursday 17 March 2022 from P&O Ferries, we would like to reassure MNOPF members that their MNOPF pensions remain secure. The assets of the MNOPF are held in a separate trust and are looked after by the MNOPF Trustee. The Trustee has appropriate arrangements in place to ensure that any remaining contributions due to the Fund are collected.” 

 

Employers in the Merchant Navy Ratings Pension Fund, another multi-employer scheme where P&O has benefits, are more at risk. P&O’s share of the net deficit of the MNRPF at 31 December 2021 is estimated by DP World to be at 46.49%. 

 

MNRPF, which includes more than 90 employers, said that “fortunately, the nature of the Fund gives confidence that members benefits remain secure". At the end of March last year, the scheme was 96% funded, with a £56m shortfall.  

 

The Financial Times reported last week that the Pensions Regulator was investigating concerns that the ferry firm had not paid a £146m debt it owed to the scheme. P&O Ferries’ outstanding deficits are secured by a guarantee over three of its ships, and it has paid about £80m into MNRPF since 2016. 

 

A P&O spokesperson said: "There is no change to our commitment to the fund following this announcement." 

 

Making the redundancies had been “an incredibly tough decision for the business: to make this choice or face taking the company into administration. This would have meant the loss of 3,000 jobs and the end of P&O Ferries,” the spokesperson said. 

 

 

The sudden unemployment of 800 people and the media attention the case has received could mean that scammers or ruthless advisers will seek to target the pension scheme members. It is not clear whether and how P&O trustees have communicated with members about the risk of pension scams.  

 

The British Steel Pension Scheme case, where nearly 8,000 workers transferred out of the scheme in 2017-18 after receiving often unsuitable financial advice, is still haunting the pensions sector; a Work and Pensions Committee inquiry, an independent review and a National Audit Office report are being followed up by a Public Accounts Committee inquiry to see what went wrong. 

 

However, the scandal of the steelworkers has also led to significant changes in pensions regulations that mean members should now be better protected from rogue advisers. In 2020, the Financial Conduct Authority banned contingent charging – where an adviser is only paid if the DB transfer goes through, creating an incentive to advise to transfer – and trustees have been given powers to block transfers where these raise red flags. 

 

Margaret Snowdon, who chairs the Pension Scams Industry Group, highlighted that in a situation of stress and anxiety, there will usually be opportunists appearing to offer help and solutions, and that those affected will be especially vulnerable as they have just lost their jobs. 

 

But things have changed since 2017, she argued: “Since British Steel there is greater awareness, and the new transfer regs will help protect pensions from scams.” 

 

Nonetheless, she stressed that “the P&O trustees and administrators will have to be extra vigilant against multiple requests from the same adviser or going to the same receiving arrangement and should be prepared to talk to members who want take out cash or transfer in a hurry.” 

 

Severance payments are potentially reducing the danger of scheme members looking to their pension to make ends meet. P&O has since offered a total of £36.5m in severance payments to sacked staff, saying no employee will receive less than £15,000 and some over £170,000, with 575 of the 786 seafarers in discussions to progress with the offers. It said it is helping staff find new jobs and providing support to those who don’t get a job. 

 

The RMT alleges that to receive payments, staff are told they need to sign non-disclosure agreements. RMT said staff were contractually entitled to a part of the payments. General secretary Mick Lynch said: "The way that the package has been structured is pure blackmail and threats – that if staff do not sign up and give away their jobs and their legal right to take the company to an employment tribunal they will receive a fraction of the amount put to them."

He added: “This is totally unacceptable and RMT will continue to campaign for our members to be reinstated at P&O and for better employment laws to protect all British workers.‎" 

 

 

To reduce the risk of people taking poor financial decisions, the owners of the company could ensure the pension schemes are fully funded so that members can be assured they would not need to take a haircut if their scheme were to fall into the Pension Protection Fund, should it come to an insolvency. 

 

Independent adviser John Ralfe, speaking on BBC5’s ‘Wake up to money’ on Tuesday, was against piercing the corporate veil to demand funding from P&O’s ultimate owners DP World; however, he suggested that DP World could assume the role of P&O: “Something DP World could do is to say, we don’t put more money in, but we are stepping into the shoes of P&O; we are going to become the direct obligor for each pension scheme, so if something does happen, nobody need worry." 

 

What should the trustees in the pension schemes with P&O Ferries staff do?