The Pensions Regulator has published a 'quick guide' to the settlement reached with Sir Philip Green. Here are the key points in full…
What are the options for BHS pension scheme members under this settlement?
Members will have three options:
- Transfer to a new independent pension scheme that will give pensioners the same starting pension as was offered by the original BHS schemes, and higher benefits than they would receive from the Pension Protection Fund (PPF), the pension lifeboat for underfunded schemes.
In a statement, the trustees said the key features of the new scheme option are:
- Benefits will not be subject to the PPF adjustment to 90% of original scheme levels
- Death benefits will be paid at higher than PPF compensation
- Pensions earned before April 1997 will increase in payment. PPF does not pay increases on these pensions.
- Members will not now be subject to the PPF compensation cap
- Current pensioners will also receive a lump sum to make up for any underpaid pension benefits since 3 March 2016 due to PPF compensation levels having been applied.
- Opt to take a lump sum if they have a small pension pot of up to £18,000 in total value. If they prefer to transfer to the new scheme, they will be entitled to the same benefit structure as all other members.
- Remain with their current scheme, currently in the PPF assessment period, and receive at least PPF benefit levels
The trustees will communicate fully with members on their options in due course and launch a
helpline so all members can discuss their options with an independent financial adviser (IFA).
How does the new scheme compare for members with their old scheme/PPF?
The benefits that members will receive under the new scheme will be above PPF levels, and, on average, are closer to the former BHS schemes than to PPF compensation. The main reasons for this are:
- Starting pension (on transfer to the new pension scheme) will be the same as in the original BHS schemes.
- Those under 60 will therefore not be subject to 10% reduction in their starting pension that applies to members in the PPF.
- Benefits payable in retirement and built up prior to April 1997 will increase at 1.8% per year. This compares to nil increases for pre-97 benefits provided within the PPF.
How much individuals receive will vary according to their particular circumstances, based on a
number of factors including their age, their length of service and when that service occurred.
How will the new scheme be run?
The new scheme will be a fully independent trust, overseen by independent pension trustees. It will have independent governance and neither Sir Philip Green nor the Arcadia group will be involved in the ongoing management of the scheme.
There will be three professional independent trustees on the board of the new scheme, to ensure there is continuing robust independent governance.
The new scheme will be required to pay the PPF levy, in the same way as any other private sector DB scheme. In the highly unlikely event that the scheme's assets prove insufficient to deliver the required level of benefits in future, members of the new scheme will benefit from PPF protection.
When will members be able to move into the new scheme?
Setting up the new scheme is expected to take a number of months. The existing BHS pension trustees will keep members updated on how this is progressing and provide them with information on their options. Members will be given the opportunity to make a fully informed decision, including taking advice from an IFA.
What is the status of The Pensions Regulator's (TPR) anti-avoidance investigation?
As a result of this settlement, TPR's anti-avoidance enforcement action against Sir Philip Green, Taveta Investments Limited, and Taveta Investments (No. 2) Limited, will cease.
Enforcement action continues in respect of Dominic Chappell and Retail Acquisitions Limited.
Could TPR have used its powers to get more money?
Throughout the regulator's discussions with Sir Philip Green and his team, it says it had always been clear that it was determined to achieve the right outcome for members of the schemes, in terms of both the amount and the structure of the settlement.
The regulator said the agreement reached with Sir Philip Green represents a strong outcome that takes account of the interests of both pensioners and the PPF, and brings a welcome level of certainty to present and future pensioners.
In arriving at this settlement, and taking the decision to end our enforcement action, the regulator said it had balanced the outcome it achieved against the uncertainty of:
- the sum or support we might achieve for the BHS schemes by pursuing our anti- avoidance investigation
- the risk of a prolonged period of legal challenge through the courts
- the delay and uncertainty the process would bring to BHS pensioners
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.
More than half of people over the age of 55 see financial security as a top priority in retirement, yet a third allocate more time to buying a new car, finds Legal & General (L&G) research.
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).