LONDON, July 22 (Reuters) - The administrator of UK materials firm Turner and Newall (T&N) said on Thursday its pension fund, which has about 40,000 members, faces a shortfall of around 875 million pounds ($1.6 billion) as its U.S. parent undergoes a major restructuring.
Pension regulators have expressed concerns about the plight of the T&N fund as its U.S.-based parent, auto parts firm Federal-Mogul, undergoes a major business overhaul under the U.S. Chapter 11 bankruptcy process.
Federal-Mogul is wrestling with potentially huge asbestos- related compensation claims, acquired when it purchased T&N in the late 1990s.
Current estimates show that if the T&N pension fund had to buy annuities for all members entitled to benefits, the pension fund would face a substantial shortfall, although it is near the solvency test set by a financial rule known as the Minimum Funding Requirement (MFR), Simon Freakley, joint administrator of Federal-Mogul UK Group, said in a statement.
A spokesman for the administrator told Reuters the shortfall was close to 875 million pounds.
"We wish to make it clear that the scheme is still open -- it hasn't terminated nor is it currently subject to winding up -- and we continue to hold discussions with all parties who have an interest in the future of the pension scheme to consider what the next steps should be," Freakley added.
The T&N pension case came to light earlier this month after the Occupational Pensions Regulatory Authority, known as OPRA, an independent state regulator, told Reuters it was concerned about the future of the fund.
Britain's pensions industry has been rocked by the plight of workers in underfunded pension schemes where the sponsoring company has gone bankrupt, most notably the case of workers at engineering firm ASW last year.
In May, the government announced a 400-million-pound package of public funds to assist employees in affected schemes and plans next year to set up a Pension Protection Fund, or PPF, to protect benefits of staff when companies go bankrupt.