THE directors of MG Rover were in talks last night to buy their way out of pension liabilities in a move that would allow the carmaker’s main pension schemes to enter the Pension Protection Fund (PPF), the Government’s safety net for employees of collapsed companies.

However, the move by the directors of Phoenix Venture Holdings (PVH) to extricate themselves from pension liabilities could see them pay only a fraction of their total remuneration while taxpayers support MG Rover’s 6,500 pension holders.

Until now MG Rover’s former workers have faced pension uncertainty because the PPF would not accept them while some of MG Rover’s related companies continued trading. That is a stipulation for multi-employer pension schemes such as the ones for employees and managers of MG Rover. The problem has been that PVH has continued to trade as a solvent company despite the directors’ promise that all its assets would be switched to a separate trust fund for the benefit of redundant workers several weeks ago.

After legal action from the independent trustees appointed to the MG Rover pension scheme, it is thought that the four directors, led by John Towers, the chairman, have offered to settle some of PVH’s pension liabilities in return for having its responsibility as an employer removed. If it no longer counts as an employer, the main schemes, which have a shortfall of £400 million, could be covered by the PPF.

However, it is possible that the settlement may cover only a few employees employed directly by PVH and may amount to as little as £2 million. The four founding directors, plus the former chief executive, Kevin Howe, and their families have a trust fund for their own pensions that stood at £17 million at the end of 2003. It is likely to have grown since. The Government has estimated that the Phoenix Four directors have taken at least £40 million from the business in pay and rewards.

The directors’ pension payments are expected to be one of many areas of management of MG Rover investigated by a full Department of Trade and Industry inquiry. An inquiry looks probable, as The Times reported last week, after this week’s submission of a Financial Reporting Council report on the accounts of all companies set up by the directors after they bought MG Rover for £10 from BMW five years ago.

Independent Trustees Ltd has been overseeing MG Rover pensions after being appointed by the Pensions Regulator when the carmaker went into administration last month. The company has been pursuing legal action against PVH. No one from PVH was available for comment.

It is not clear when or whether PVH will be put into administration. The company has assets, including the stately home Studley Castle, but will also have creditor claims. The directors first valued the assets at £50 million but a day later revised that down to £10 million to £30 million.

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