The Pensions Regulator (TPR) has agreed a £25m settlement in the "long-running" anti-avoidance case against the current owners of bed manufacturer Silentnight, the HIG Group.

TPR alleged that the US private equity group had deliberately brought about the unnecessary insolvency of the Silentnight Group in order to buy the business out of administration, leaving behind the defined benefit (DB) pension scheme.

The case argued that the targets, including certain entities, members and executives, or former members and executives of the HIG Group, had acquired the employers’ bank debt and used their position as a lender to bring about the unnecessary insolvency of the employers.

TPR then alleged that that the targets took further steps to buy the employers’ business at below market value as part of the following administration process, with the DB scheme severed from its sponsoring employers’ business by a pre-pack administration.

However, the targets of TPR’s action have disputed the case and settled the matter with no admission of liability.

Together with the proceeds from the insolvency process and a £25m payment by HIG, the pension scheme, which has 1,200 members, has now received approximately £35m.

Despite this, TPR stated that the scheme is still expected to transfer to the Pension Protection Fund, explaining that whilst the £25m is a “substantial sum”, it will not eradicate the scheme’s deficit on a PPF basis.

Commenting on the case, TPR executive director frontline regulation, Nicola Parish, said: “It is our view that HIG brought about the unnecessary insolvency of the original Silentnight Group in order to buy its business out of a pre-pack administration without the pension scheme.

“We believe this is unacceptable and it was vital we acted, in part as a deterrent against this type of behaviour in the future.

“We were prepared to hold settlement discussions in parallel to our enforcement action to see if an appropriate outcome could be achieved without the need to formally use our powers or risk prolonged legal action. This enabled us to avoid further costs and obtain certainty for scheme members.

“This was a complex enforcement case, involving the successful defence of a judicial review application against well-resourced targets in the UK and overseas. We continued to pursue our case despite those challenges.”

The regulator had previously issued two warning notices against HIG Group in 2014 and 2016 seeking contribution notices against targets in the UK and overseas, having also successfully defended a judicial review application by the targets in 2016.

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