UK roundup: BHS, TPR, Philip Green, PLSA, Barnardo’s
The Pensions Regulator (TPR) has started enforcement action against Philip Green and others aimed at making them give financial support to the pension schemes of collapsed UK retail chain BHS.
BHS fell into administration in April, leaving the future uncertain for its two defined benefit (DB) pension schemes, the larger of which had a pension deficit of £571m (€641m).
The company had been sold to a firm called Retail Acquisition by Green in 2015.
TPR said yesterday it sent warning notices (statements of its case) to Green, Taveta Investments, Taveta Investments (No. 2), Dominic Chappell (majority owner of Retail Acquisitions) and Retail Acquisitions.
Each notice is more than 300 pages long and sets out the arguments and evidence as to why the regulator believes the respondent should be liable to support the BHS pension schemes, following the sale of the business in March 2015 and its subsequent insolvency.
Lesley Titcomb, chief executive of TPR, said: “Our decision to launch enforcement action is an important milestone in our work to attain redress for the thousands of members of BHS schemes who have been placed in this position through no fault of their own.”
Graham Vidler, director of external affairs at the Pensions and Lifetime Savings Association, said: “The Pensions Regulator is doing the right thing today by exercising its powers to begin enforcement action, but, despite the regulator’s best efforts, this is unlikely to result in a quick resolution.”
In other news, the pension fund of UK children’s charity Barnardo’s has again lost a battle over the indexing of its pensions benefits so that it follows the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI), after the Court of Appeal of England and Wales upheld an earlier court decision.
The RPI has been rising at a faster pace than the other, more recently introduced UK inflation measure of the CPI, and the deficit-hit DB pension scheme may have been able to improve its funding position by switching its indexing basis in this way.
The appeals court upheld a ruling that, as sponsoring employer of the pension scheme, Barnardo’s had no power under the 1988 rules of the scheme to substitute the CPI or some other index for the RPI.
Fuat Sami, partner at Sackers, said: “Today’s court decision will continue to leave employers and trustees, who have been grappling with this issue, in an unsatisfactory place.
“Unless the government moves to consult more widely on amending primary legislation – to relax the existing section 67 requirements that govern members’ rights – the ability of schemes to switch from RPI to CPI will continue to depend on how the scheme rules were originally drafted many years ago. It is essentially a lottery.”
Jason Shaw, senior associate at Allen & Overy, said the court’s decision hinged very much on the particular wording of a scheme’s deed and rules, which he said was “an uncertainty that is not particularly helpful for either trustees or employers.”
“The Court of Appeal, by majority decision, upheld Warren J’s judgment in the High Court that the wording did not give the trustees a discretion – but the fact there was a disagreement on the wording of the rules shows how complex this issue is,” he said.