House of Fraser's defined benefit (DB) pension scheme is expected to enter Pension Protection Fund (PPF) assessment, but may be able to buy out benefits with an insurer.
It comes after both House of Fraser Stores and House of Fraser UK & Ireland - the last-man-standing scheme's two sponsors - are understood to have appointed EY as administrators earlier this morning.
The House of Fraser scheme is split into two sections - House of Fraser and Beatties & Jenners. At its most recent triennial valuation for which information is public, dated 31 December 2013, the House of Fraser section had an actuarial deficit of £71.3m, while the Beatties and Jenners section had a surplus of £11.5m.
PP understands the House of Fraser Beatties & Jenners Pension Scheme now has a £20m surplus on a PPF s179 basis. While it will still be required to go through assessment, there is a possibility members will gain a better outcome than in the lifeboat fund through a buyout.
Dalriada, the scheme's professional trustee, said it expected the scheme to enter PPF assessment.
"As a minimum, members will receive PPF compensation levels. It is possible that the scheme could buy out benefits at a higher level than the PPF compensation levels but the detail would need to be worked through during the PPF assessment period.
"The trustee is taking advice from its professional advisers and will be sending a detailed communication to members to provide further information as soon as possible."
A PPF spokesperson said: "We are aware of the insolvency of House of Fraser and anticipate formally confirming the scheme has entered PPF assessment shortly. Members can be assured that the PPF is there to protect them."
The companies, among others within the group, have since been bought for £90m by Sports Direct's Mike Ashley via a pre-pack administration (PPA). Ashley had held an 11% stake in House of Fraser prior to its insolvency. A rival bid from Edinburgh Woollen Mill owner Philip Day to buy the business pre-administration, including the pension scheme, for more than £100m was rejected.
The ailing retailer's collapse came despite shareholders approving a company voluntary arrangement (CVA) to close stores and cut rents back in June. The pension scheme, which was able to vote on the CVA as a creditor, is understood to have supported the CVA.
However, the CVA was subject to challenge in the Scottish High Court, with the hearing due to begin on 14 August, and the companies' original potential buyer, C.banner International, pulled out.
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