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UK Pensions Regulator launches probe into BHS scheme

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The UK Pensions Regulator (TPR) has confirmed it is investigating the case of the pension scheme of the collapsed department store chain BHS.

A TPR spokesperson said: “We can confirm we are undertaking an investigation into the BHS pensions scheme to determine whether it would be appropriate to use our anti-avoidance powers.”

BHS, which was owned by Retail Acquisition, was put into administration yesterday after attempts by shareholders to find a buyer fell through.

TPR has the power to act where it believes an employer is deliberately attempting to avoid its pension obligations, leaving the Pension Protection Fund (PPF) to take on these liabilities. 

Such action might include issuing contribution notices, financial support directions or restoration orders.

The collapsed company has two defined benefit pension schemes, with the larger of the two having a pension deficit of £571m (€734m).

BHS had been sold to Retail Acquisition by its long-term owner businessman Philip Green in 2015.

TPR warned that its investigation into the BHS pension scheme could take a considerable amount of time.

“Such cases are complex,” the spokesperson said.

Frank Field, chair of the Work and Pensions Committee, announced the parliamentary committee would now be inquiring into the PPF, and in particular, how the receipt of pension liabilities from BHS would affect the fund and its users.

“We need as a committee to look at the Pension Protection Fund and how the receipt of pension liabilities of BHS will impact on the increases in the levy that will now be placed on all other eligible employers to finance the scheme,” he said.

Field said the committee would then need to judge whether the law was “strong enough to protect future pensioners’ contracts in occupational schemes”.

The PPF had already been working with the pension scheme since 3 March when the company was in financial difficulties, but these discussions are now at an end because of the newly launched administration process.

Malcolm Weir, head of restructuring and insolvency at the PPF, said: “Following the BHS CVA last month, we had been in discussions to find a solution that was in the best interests of the pension schemes and the company.  

“However, following the BHS announcement that it has filed for administration, the PPF will now work with the Pensions Regulator and other parties to secure the best outcome for the pension schemes.”

Scheme members can be assured they are protected, Weir said.

Meanwhile, the scheme is continuing to pay benefits to its pensioners at PPF levels. 

On a PPF basis, the larger of the pension schemes has a shortfall of between £200m and £300m.

Duff & Phelps, which has been appointed as administrators of the BHS group, said recent negotiations by the company’s shareholders to find a buyer from the business had been unsuccessful and that property sales had not materialised as expected.

“Consequently, as a result of a lower-than-expected cash balance, the group is very unlikely to meet all contractual payments,” he said.

Duff & Phelps said BHS would continue to trade as usual while the company sought to sell it as a going concern. 

The company is understood to have received more than 30 expressions of interest in buying the company, with a few of these from potential buyers that could be considered serious.

At this stage, it is still possible that the company could be sold to a party that would take on the pension liabilities, but all depends on complex negotiations including many stakeholders.

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