WHEN newspaper publisher Johnston Press was bought out of pre-packed administration last weekend there was a huge sigh of relief that the debt-laden company’s future had been secured, but more than a little consternation about what the deal meant for the members of the company’s defined benefit pension scheme.

Norwegian investor Christen Ager-Hanssen, whose firm Custos had been making noises about buying out Johnston Press for much of this year, was the most vociferous, claiming that the deal had seen the company “robbing its own pensioners blind”.

Clearly upset that his own 25 per cent stake in the business was wiped out as part of the pre-pack, Mr Ager-Hanssen has even gone as far as to set up a Pensioner and Shareholder Action Group to, he said, “hold those responsible to account”.

READ MORE: Debt and pension woes weigh on publishing firm Johnston Press

Given that the interests of shareholders, who exist to take money out of a business, are diametrically opposed to those of pension scheme members, this makes no sense.

It makes even less sense when it is considered that the administration has actually secured members’ interests by paving the way for the pension to enter the Pension Protection Fund (PPF).

When it does, those that have already retired will see no difference to the pension they receive, although annual increases to income will be pegged to the CPI measure of inflation rather than RPI.

Those who are yet to retire will receive a 10% reduction in their entitlement, although pension consultant John Ralfe noted that as the PPF is “so generous” in the way it calculates the tax-free lump sum pensioners can take at retirement the reduction is likely to be closer to 5%.

While the PPF has put the Johnston Press scheme into its mandatory period of assessment, the only thing that will stop it entering the fund is if enough money can be recovered from the administration to buy an annuity that would give its members a better pension than the lifeboat itself will pay.

Given that the PPF has put the sum required to do that at £305m - a figure that would have allowed Johnston Press to stay solvent by paying off its debts and wiping out its pension deficit - that seems a highly unlikely outcome.

Indeed, Mr Ralfe said there is not a “shadow of a doubt” that the scheme will enter the PPF, which is funded by levies paid by all UK defined benefit pension schemes as well as the assets of the schemes it takes over.

READ MORE: Johnston Press takeover ‘secures jobs and future of its titles’

The demise of Johnston Press had been a long time coming. Having borrowed heavily to fund the acquisition of scores of local newspapers as well as trophy titles such as The Scotsman and the i, the cash-strapped business was facing the prospect of repaying £220m worth of bonds by the middle of next year.

Though it had put itself up for sale in the hope of finding a buyer that could wipe out that debt, the fact its pension scheme had a multi-million-pound deficit meant doing so was always going to be a tall order: paying off bondholders in exchange for a viable business is one thing, taking on a large and unstable multi-year liability as part of that is another thing entirely.

Viewed like that, the pre-pack, which allowed the bondholders to take over a virtually debt-free business that would almost certainly have failed otherwise, was the best possible outcome not just for Johnston Press’s 2,000 employees but for its near-5,000 pension scheme members too.

With the Pensions Regulator likely to order Johnston Press’s new owners to make a significant contribution to the PPF, the biggest cause for concern now is whether Johnston Press pensioners fall prey to the kind of scammers that inevitably emerge when an event like this occurs. This was seen in 2017 when a rescue package was secured for Tata UK, the sponsoring employer of the British Steel Pension Scheme.

As part of the rescue the company was able to pass its scheme to the PPF in exchange for a £550m cash injection, but unscrupulous financial advisers took advantage of the ensuing confusion to persuade scheme members to transfer their pots into unsuitable and expensive alternative schemes. The situation, according to Work and Pensions Select Committee chair Frank Field, resembled “a feeding frenzy” and a “honeypot for scammers”.

READ MORE: PPF to make £305m claim on assets of Johnston Press

For Andrew Megson, executive chairman of advisory business My Pension Expert, the best way for members of any scheme to avoid being scammed is to never engage with unsolicited contact regarding their pension, no matter how plausible the alternative being offered may seem.

“Scammers are shameless when it comes to contacting potential victims,” he said. “Whether it’s via email, telephone or even a house call, they will try and catch you off guard. If in doubt, visit the Financial Conduct Authority’s website, which offers a detailed list of authorised pension providers. If they’re not listed, it’s likely a scam.”