Fears over pensions at the Rock

Jan 12 2008 by Adrian Pearson, The Journal

NORTHERN Rock bosses have been accused of carrying out a “piecemeal sell-off” of the bank’s assets after it sold £2.2bn worth of its mortgage book to a US investment bank.

The troubled lender has sold 2% of its total assets to JP Morgan – the Wall Street bank now being advised by Tony Blair.

The news was announced on the same day it was revealed that Northern Rock’s pension fund had suffered as a result of the run on the bank.

The trustees of the Northern Rock pension scheme have written to members advising them of the uncertain future.

They carried out an review of the pensions fund following the bank’s recent troubles, and discovered a £100m deficit that could affect those employees who will depend on a Northern Rock pension in 30 years’ time.

Those currently claiming or about to claim their pension should be relatively unaffected, a spokesman said. The trustees will now go over the pension funds to discover the best way to increase the accounts, which may involve securing the funds against Northern Rock assets.

Given the bank’s present situation, this would need approval of the Bank of England and the Treasury.

Unite, the union representing bank employees, has called on the bank to show its staff more support.

Graham Goddard, Unite Deputy General Secretary, said: “The announcement symbolises yet another blow for the committed staff of Northern Rock. Unite is pressing the company for urgent clarification for our members to ensure that the income of the fund is protected with security.

“This news comes on the same day that Northern Rock has announced the sale of their Lifetime Mortgage book. Unite is extremely alarmed that this move may symbolise a piecemeal sell off of the bank’s assets. Unite will continue to oppose any asset stripping of Northern Rock and fight for the company to remain as a single financial entity based in the North-East.

“In order to ensure the concerns of the employees of Northern Rock are heard, Unite members and staff will be demonstrating outside the shareholder meeting on Tuesday.”

Chief executive Andy Kuipers said the sale agreement was a “positive development” for the bank.

“This is a relatively small transaction, representing around 2% of Northern Rock’s gross assets, but it is a positive development in the company’s ongoing strategic review,” he said.

“It illustrates the quality of our assets, which has enabled us to achieve a sale at a premium despite continuing difficult financial markets and will allow the company to reduce its debt to the Bank of England.”

On Thursday, Chancellor Alistair Darling conceded that it “may not be possible” to find a private buyer for the bank.

He told MPs all options, including nationalisation, remain on the table.