The Pensions Regulator ("TPR") has announced that it has reached a settlement with Sir Philip Green to help secure the pensions of 19,000 members of two BHS pension schemes, following the collapse of the high street retailer.
The deal, worth £363m, includes the creation of an independent pension scheme funded by the majority of the settlement amount and to which members of the current BHS schemes can transfer. If they do, they will receive the same starting benefits to which they were entitled in the BHS pension schemes (at a higher level than that which would otherwise be available from the Pension Protection Fund ("PPF")), with an annual increase rate for benefits built up prior to 6 April 1997 of 1.8% (as opposed to a nil increase for pre-6 April 1997 benefits under the PPF). The new scheme's trustee board will include three professional trustees to "ensure there is continuing robust independent governance" of the scheme, and neither Sir Philip nor the Arcadia group will have any involvement in its management.
Members do not have to join the new scheme: instead, they can opt for a lump sum payment (if the value of their pension pot is £18,000 or less), or remain in their current scheme and receive their benefits from the PPF.
The agreement follows the issue, in November 2016, of Warning Notices from TPR to Sir Philip, Taveta Investments Limited, Taveta Investments (No. 2) Limited, Dominic Chappell and Retail Acquisitions Limited, which set out TPR's case for each recipient's liability to fund the pension schemes following the sale and subsequent insolvency of BHS. Had no agreement been reached with Sir Philip, the matter would then have been referred to TPR's Determinations Panel. It has the power, amongst other things, to issue a Financial Support Direction or a Contribution Notice in order to recover funds due to the pension schemes from the sponsoring employers, and others.
The BHS case demonstrates again that TPR has a useful array of enforcement tools and, as TPR itself has indicated, it is increasingly willing to use them. The threat of further regulatory action clearly gave the parties involved in the BHS case the encouragement they needed to agree a funding arrangement. While the investigation against Sir Philip, Taveta Investments Limited and Taveta Investments (No. 2) Limited will now cease, enforcement action against Dominic Chappell and Retail Acquisitions Limited continues.
TPR's announcement regarding the settlement is available here.
Disclaimer
The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.
