A REVIEW of the British Wool Marketing Board (BWMB) by the Department for the Environment, Food and Rural Affairs (Defra) has recommended that the board include in its annual report to ministers a summary of the state of the pension fund and the relationship between the board's assets and the fund's liabilities.

The long-awaited review asserts that issues relating to the pension fund arising from the past final salary scheme are a major barrier to change.

It points out: "The pension fund's trustees have a recovery plan in place and, by 2013, the deficit on an ongoing basis should no longer be significant. However, there will continue to be a significant liability on a wind-up basis; at the moment, that liability amounts to £18m and may exceed the board's assets.

"Under the Pensions Act 1996, if the regulator and pension fund's trustees were to lose confidence in the ability of the board to carry out the recovery plan and continue to fund the pension scheme, they could demand the board immediately sell assets to cover the deficit.

"In practice, the board would have to be dissolved; producers would probably receive nothing and current employees of the board would be at risk of receiving less than their full pension entitlements.

"The board should therefore continue to carry out its activities in a manner that provides confidence to the trustees of the pension fund and the regulator that they need not demand the winding-up of the pension scheme."

The cash-strapped board operates a split payment system where an advance is made when the wool is delivered and the balance paid the following year once the wool has been sold.

In light of the review, producers will now have to assess the risks of not getting the balance payment for their wool in the event of the pension trustees winding up the pension scheme. Many may well decide not to take that risk and sell their wool to Irish buyers, who pay the full price on delivery.

The review also notes: "There is also more general producer dissatisfaction with current low world prices for wool realised at auction, and thus a feeling that alternative marketing arrangements could prove more rewarding."

It recommends that "the board simplify its marketing arrangement with a view, if feasible, of providing a better return for low-value wool".

The review states: "In recent years, control of agricultural issues has been devolved to the Scottish, Welsh and Northern Irish administrations, and there have been demands for a break-up of the board's UK monopoly on those grounds.

"The board should be alive to these concerns and take them into consideration when determining future change. The board should strengthen its relationship with the devolved administrations to reflect the devolved political landscape."