Former BHS owner Sir Philip Green has announced that he has agreed a cash settlement worth up to £363m with The Pensions Regulator (TPR) to settle the long-running dispute over the pension liabilities of the collapsed retail giant.
The arrangement, which has the support of the trustees of the two BHS pension schemes, will see Green provide funding for a new, independent pension scheme to give members the option of the same starting pension they were originally promised by BHS.
Today’s announcement brings the uncertainty of the 19,000 existing BHS pension scheme members to an end, and closes TPR’s enforcement action against Green.
According to a statement from TPR the board of the new scheme will be made up of three professional independent trustees to ensure there is continuing robust independent governance.
Members of the current BHS schemes will have three potential options: to transfer to the new scheme, opt for a lump sum payment if eligible or remain in their current scheme (and receive benefits from the PPF).
‘Significantly better outcome’
In a press release Green stated that he had made a voluntary contribution of up to £363m to enable the trustees of the BHS pension schemes to achieve a “significantly better outcome” than if they had entered the Pension Protection Fund (PPF).
“The settlement follows lengthy, complex discussions with the Pensions Regulator (tPR) and the PPF,” the statement outlined, “both of which are satisfied with the solution that has been offered.
Image source: TPR
Green apologised to the BHS pensioners for “this last year of uncertainty”, and stated that he was happy to confirm that any of the pensioners that have faced cuts over the last year will now be brought back to their original BHS starting level pension.
Still a cut verses full scheme benefits
Entering the government-administered PPF fund, designed to protect the pensions of companies that fall into insolvency, would have seen the future incomes and benefits for around 19,000 current and former BHS employees fall by up to 25%.
Under the Green deal announced today members will be better off than the PPF scheme, but will get on average 88% of their original pension – still a cut verses full scheme benefits.
TPR Chief Executive Lesley Titcomb said: “The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes. It takes account of the interests of both pensioners and the PPF and brings a welcome level of certainty to present and future pensioners.
Iain Wright MP, chair of the BEIS committee which jointly investigated Green’s role in the retail giant’s collapse, welcomed the news, stating that it goes “some way toward righting the failures and greed that we saw during the entire BHS saga”.
Commenting on Twitter, former pensions minister Sir Steve Webb stated that Green “could have spared his staff many months of misery + uncertainty if he had stumped up the cash willingly”,
Image source: TPR
BHS was liquidated last year after administrators Duff & Phelps failed to find an acceptable buyer for the business, leaving a £570m black hole in the company’s pension fund.
The company was sold in 2015 for £1 by Green to the Retail Acquisitions group headed by former racing Dominic Chappell, and in April last year filed for administration after one of the most dramatic declines in UK retail history.
For more information see The Pension Regulator’s quick guide to the BHS pension settlement.
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