01 December 2020
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3 min read
Topshop is one of the brands that faces closure
The collapse of Sir Philip Green’s retail giant Arcadia must be met with clear solutions and support for its pension scheme, which looks likely to enter Pension Protection Fund (PPF) assessment, Stephen Timms has said.
In a letter to The Pensions Regulator (TPR), sent yesterday (30 November), the Work and Pensions Committee (WPC) chairman sought clarity on a £385m funding package agreed for the scheme last year as it sought approval for a company voluntary arrangement.
Deloitte was yesterday appointed as administrator for Arcadia and is expected to seek buyers for its individual brands, which include Topshop, Topman, and Dorothy Perkins. The administration follows the company's failure to agree a £30m loan to continue operations.
The scheme is reported to have a £350m deficit, although it was not revealed on what basis this is calculated.
Timms questioned TPR chief executive Charles Counsell on the strength of last year's agreement, which included a £100m payment from Lady Tina Green "to be paid regardless of what happens to [Arcadia] in the future", as well as security over Arcadia assets worth £210m.
A further £25m of annual deficit recovery contributions (DRCs) were due, but amid the onset of the Covid pandemic it was reported that these would be paused, allowed under TPR's coronavirus easements.
Timms asked TPR whether DRCs had been affected by the easements, and also asked how the regulator was learning from past distressed scenarios, such as BHS and British Steel, about how scam risks and defined benefit funding.
A TPR spokesperson said: "We are aware of the challenges that the business is currently facing in these unprecedented times and we continue to work with the directors, the trustees and their respective advisers, as well as the PPF, to protect the position of the Arcadia pension schemes' members to the fullest extent possible.
"Savers should visit The Pensions Advisory Service website for impartial guidance before making any decision about their retirement or get advice from a financial adviser authorised by the Financial Conduct Authority."
But former pensions minister Baroness Ros Altmann said that, while supported by the Greens, the Arcadia scheme is not like the BHS scheme.
"In that situation, TPR had concerns about the lack of funding for the BHS Pension Scheme over many years and the fact that the business had been offloaded without plans in place to fix the deficit of over half a billion pounds," she said. "In the case of Arcadia, however, the owners have reached an agreed schedule of DRCs that was to see £100m paid in over three years, half of which has already been paid.
"Even if a further £50m is paid next year, as per the guarantee agreement, the scheme would still not escape the PPF."
She added that quantitative easing has increased liabilities and annuity costs "significantly", adding a "significant strain" on pension schemes, especially for those with weak sponsors who are told by TPR to "steer clear of trying to earn better investment returns and stick to very low-return investments".
She said it was a "sad reality" that the schemes would likely enter the PPF, adding: "It is true that Sir Philip Green did pay £363M to rescue the BHS pension scheme from the PPF, and he has always said that the workers are like family to him, but in the current retail environment, and given the lack of apparent legal or regulatory obligations to do so, it would be unwise to rely on such an outcome."
