The Department for Environment, Food and Rural Affairs has promised that it will pay out up to £125m if necessary to cover historic pension liabilities accrued while British Waterways was a publicly owned body.
The waterways agency, which will become a charity in June under the name the Canal & River Trust, recorded a £60m pensions shortfall in its last set of accounts. Independent experts have estimated that if it shut down its final deficit could be as much as £200m.
Defra announced last week that it would provide the CRT with £802m of funding over 15 years. This will include a one-off payment of £25m, intended to compensate the new organisation for taking on an existing pension deficit.
A spokesman for the department this week confirmed that it would also offer a "last resort" guarantee of £125m to meet any pension deficit if the trust went out of business. He said the one-off payment of £25m, included in the main settlement, was intended to "help CRT protect historic pension liabilities".
Robin Evans, chief executive of British Waterways, told Third Sector: "Our pension fund trustees are very happy with the pensions settlement we’ve received. They are comfortable they can meet their obligations.
"What’s most important to the employees is that, if the trust goes bust, the government will guarantee the pensions."
British Waterways currently offers ‘defined-benefit’ pensions in line with other government agencies, and it has agreed that employees already working for British Waterways will continue to receive that pension. But new employees will receive less generous ‘defined-contribution’ pensions, which present much less risk to the employer.