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UK Pensions Regulator: TPR bares its teeth

Since UK retailer BHS entered administration in April, leaving its two pension funds with a combined deficit of £571m (€743m) on a buyout basis, questions have been raised about the ability of the UK Pensions Regulator (TPR) to hold the industry to account.

BHS once a mainstay of the British high street, struggled to adapt to the ever-changing world of retail, and its sale in 2015 by Arcadia Group to Retail Acquisitions for £1 failed to revive its fortunes. 

Following its collapse, some have asked whether TPR has the teeth to conduct its job, which the regulator appeared to dismiss out of hand. When an MP asked chief executive Lesley Titcomb whether her organisation would benefit from greater powers, she simply replied: “The work and pensions select committee is well aware I am prepared to ask for more tools in my toolkit if I need them.”

The regulator has nevertheless been portrayed as slow to act and overly keen to mediate disputes – rather than avail itself of its enforcement powers and deal with any deficit swiftly, regardless of the impact on a scheme sponsor. 

But neither TPR’s evidence or the timeline supplied by Arcardia Group supports the narrative of a hands-off regulator. 

Following Titcomb’s appearance in front of the parliamentary committee, Arcadia company secretary Adam Goldman took issue with her assertion TPR did not know about the BHS sale until it was announced. In a letter to the committee, Goldman outlined how TPR monitored the evolving situation around Arcadia’s ownership of BHS continually. He also claimed TPR asked for an “urgent” meeting when it learned a sale was being lined up, seeking assurances the sale would not damage the pension funds’ employer covenants. 

Titcomb also touched on the question of BHS’s dividend payments to Philip Green’s company. The payments, portrayed by some as Green rewarding himself rather than properly funding the pension scheme, ceased long before the deficit rose to its current level. Nevertheless, Titcomb stated that the regulator was looking at the matter. 

“It is germane to our open investigation at the moment,” she told MPs, “so I would rather not discuss in too much detail precisely what we are looking at in terms of past history.”

The ever-increasing deficit is also a result of the current economic environment. While the buyout deficit at the main BHS scheme rose from £354m to £452m between 2009 and 2012, interest rates also fell to lows unseen since occupational pensions were launched – a point emphasised by former pensions minister Steve Webb in his written evidence to the committee.

He said it was worth considering that schemes had been “running to stand still” in recent years. “Because interest rates have continued to fall and longevity has continued to improve, underlying deficits have tended to deteriorate. So even an employer that agrees a recovery plan and sticks to it can find that, at the next three-yearly revaluation, the deficit has gone up rather than down.”

The final and most contentious point, seen by some as yet another sign of TPR’s weakness, is that Arcadia attempted to negotiate a 23-year recovery plan in 2013, up from 12 years. 

Titcomb took pains to emphasise that the regulator was still examining the proposal when Arcadia’s sale triggered an anti-avoidance investigation, TPR’s method of warning sponsors they may be shirking their funding duties. 

While it is possible TPR might benefit from having fewer conflicting objectives – ensuring company solvency while preserving member benefits, for example – it seems it acted in line with its mandate when tackling the BHS crisis. 

If anything, its perceived lack of action is a result of work proceeding privately, with successes only revealed long after settlements have been agreed, if at all.

But, as long as the government seeks to maintain a balance between a company’s well-being and pensioner benefits, TPR will simply be unable to act as decisively as parliamentarians and outside observers would like. 

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