Northern Rock pension talks stall

Chairman of trustees Sir David Chapman told members an agreement will only been reached if The Pensions Regulator becomes involved.

Chapman said: "Negotiations with the company have now reached a point where further progress towards agreement is probably going to be difficult to achieve. No agreement has yet been reached about the most critical assumption, namely the level of return we expect to earn in future from our investments.

"This assumption has a major effect on the funding level the valuation will disclose. The higher the return assumed, the better the funding position and vice versa."

In October last year the trustees placed all the final salary scheme assets into government gilts.

Chapman said the company now wants the scheme to be invested in higher return seeking assets.

The company said the fact Northern Rock was put into temporary ownership in February gives the trustees more flexibility with investment strategy, however, the trustees believe it means the sponsor covenant is substantially weakened.

He added: "The trustees’ conclusion – supported by expert advice from their professional advisers – is that the risks to the delivery of the company’s recovery plan in current market conditions are significant.

"The trustees therefore believe that it would be inappropriate to increase the level of investment risk within the scheme until such time as they are sufficiently confident in the company’s financial position."