Flybe went into administration on 5 March 2020, putting over 2,200 employees out of work. 1,350 are now at risk of losing their defined benefit pensions.

Flybe closed their defined benefit pension scheme in 2017/18 and replaced it with a defined contribution pension scheme. The defined benefit pension scheme still has 1,350 members. It has been reported the Flybe Group Plc DB pension scheme had assets of £138m and liabilities of £217.7m leaving a deficit of £79.7m. Most DB pension schemes require the employers to make up any deficit.

In February 2019, Flybe was purchased for £2.8m by a consortium including Virgin Atlantic, Stobart and hedge fund Cyrus Capital with the promise of loans to keep Flybe in the air. Assets of Flybe were secured in favour of banks and hedge funds, included DLP Holdings SARL who is owned by funds managed by Cyrus Capital Partners. This process reduced the risk of the new owners losing out if Flybe went bust. The shareholders would be first in the queue to get their investment back from the proceeds of any sales of fixed assets.

The DB pension scheme is deemed as an unsecured creditor so the pension scheme members would be the last in the queue to recover any assets.

The Flybe DB pension scheme, known as British Regional Airlines Group Pension Scheme, was moved and registered in the Isle of Man. The pension schemes registered in the Isle of Man fall outside of protection and jurisdiction of The Pensions Regulator and Pension Protection Fund, who would normally step in and rescue a distressed scheme. PPF would normally bail out the pension fund to the tune of 90% of the funds the pension scheme members should receive. The tax haven Isle of Man has no provisions to protect pensions funds and scheme members. This has left the Flybe pension scheme members high and dry.

There are now calls for a government enquiry into why the company shareholders were allowed to move the pension fund to the Isle of Man. Under Section 172 of the Companies Act 2006, UK company directors are required to have regard for “the interests of the company’s employees” in making decisions. It is clear to many that transferring a £169.5m DB pension scheme of a distressed UK PLC outside the UK was not in “the interests of the company’s employees”. It would leave them exposed to losing out on their pension, which it has.

To make matter even worse for the pension scheme members, the recent coronavirus stock market crash will have reduced the pension scheme assets even further.