UK - The trustees of retailer WH Smith's pension fund have agreed a scheme restructure in a move labelled “ground breaking” by market commentators.
The restructure followed the book and stationery giant’s decision earlier this year to demerge its news distribution and retail arms in August. Instead of demerging the pension scheme as well, the fund will now be divided into two sections.
According to international law firm Mayer, Brown, Rowe and Maw, which advised the scheme, the assets and liabilities of each section will be separately valued and accounted for.
The move was made possible by a change to the tax regime in April, which removed the previous Revenue requirement that all employers participating in the same pension scheme should normally belong to the same corporate group.
“The trustees suggested continuing with one scheme because they felt it offered stability and security for the members,” said Mayer, Brown, Rowe and Maw pensions partner Andrew White.
“The costs are lower, and dividing the scheme into sections gives the two businesses enough assurance that neither will be responsible for the deficit in the other’s section,” he continued.
While WH Smith did not respond to requests for comment, a release by the group last week stated: “There will be no change to employees’ pension benefits as a result of the proposed demerger.
“Upon demerger, the WH Smith Pension Trust will be divided into two sections with each successor entity bearing its own share of the existing WH Smith Group pension obligation.”
Last week, WH Smith also announced that the group and pension trustees had agreed a £50m (€72m) top up payment to the scheme from £70m of new borrowings of Smiths News.
According to reports, the news distribution business will have a £14m pension deficit under the IAS accounting standard, and the retail arm will be £24m in the red.
The overall pension deficit has narrowed from more than £150m two years ago, one report added.