Element Six deliberately orchestrated pension pot wind-up, court hears

Multinational Element Six deliberately orchestrated the winding up of its defined pension scheme in 2011, the High Court heard yesterday.

The move drastically reduced the benefits that can be paid to workers who contributed to the fund and left a number of deferred members, due to be paid their pensions over the last 18 months, with nothing.

More than 100 workers from the industrial diamond manufacturer are suing the scheme’s trustees for breach of duty, claiming they should have demanded the company ensure their pensions were fully funded when it was wound up.

Expert witness Vernon Holgate, a professional pension fund trustee from the UK, told the court the idea of winding up the scheme was introduced "quite quickly" to a subcommittee set up in mid-2011 to review its solvency.

He added this appeared to have been driven by the company’s representative on the subcommittee and its actuary Willis, which he said was serving the needs of Element Six as opposed to those of the trustees.

The company established the subcommittee, made up of its representative Carmel Sexton, trustees' chairman Danny Coady and Joe Byrne of Willis, in response to a report from the actuary warning that a funding proposal put in place two years earlier, under which the company had to contribute €10.75 million per year to the fund until 2020, was no longer adequate and was about to go off track.

Mr Holgate yesterday said the report's timing and conclusion were unusual. He said the funding proposal had been on track at the beginning of 2011 and the following March, but was suddenly off track in June.

He noted that Element Six commissioned the report, but it would have been more usual for a company to ask the trustees to do this. Mr Holgate also told the court there was no need for it, because the scheme’s financial position would have been formally certified at the end of the year.

From early on, Mr Holgate said “there seems to be general agreement within the subcommittee that the scheme’s funding is off track in shape or form, or was very likely to be at the end of the year”.

The witness said the company used the subcommittee to introduce the idea of winding up the scheme in the first place, and drew the trustees’ chairman into this, who in turn introduced it to the other trustees.

“The key adviser is Willis– they have been acting for the company,” he stressed.

On September 6th, the company's chief financial officer, Jonathan Aiken, wrote to the trustees saying the company was no longer willing to continued with the €10.75 million annual contribution to the fund.