Coats Group has reached an agreement with the trustee of the Coats UK Pension Scheme to switch off pension deficit repair payments from 1 January 2024.

As part of this, the group agreed to pay a one-off lump sum payment of £10m to move the scheme into an expected surplus position against the technical provisions funding basis and enable the 'switch off' threshold to be comfortably met.

The agreement is expected to result in a free cash flow benefit of £2m per month while the payments remain switched off, with deficit repair payments to remain switched off so long as the scheme’s assets remain above 99 per cent of its technical provisions.

The group previously reported that it was making “significant" progress in relation to the de-risking of its defined benefit UK pension scheme, with the on/off trigger mechanism agreed with the trustee earlier this year.

Coats chief financial officer, Jackie Callaway, commented: “We have made significant progress on pensions in recent years, and the news today is another major milestone that benefits all stakeholders.

“We remain focused on making further progress in order to maximise Coats’ free cash flow generation.

“We are continuing to work with the trustee of the scheme on a collaborative basis, with the medium-term aspiration of fully insuring the scheme, removing UK pension risk from the group balance sheet and optimising our capital allocation framework to enable additional growth opportunities.”

The scheme also completed a £350m bulk purchase annuity buy-in transaction with Aviva in 2022, securing the benefits of around 3,700 members.

---