The Pensions Regulator is investigating whether it needs to apply its anti-avoidance powers in the case of retailer BHS Ltd.’s pension funds, following its entering into administration under the U.K.’s insolvency laws, said a spokesman for the U.K. watchdog.
The pension funds are currently undergoing assessment for entry into the U.K.’s lifeboat fund, the £23 billion ($33 billion) Pension Protection Fund, London. This process remains ongoing. When The Pensions Regulator believes a sponsoring employer is deliberately attempting to avoid its pension fund obligations, it may issue one of three notices, requiring payment of debts to the fund or the PPF; financial support; or a restoration order, allowing TPR “to take action to have the assets (or their equivalent value) restored to the scheme.”
BHS sponsors two pension funds, the BHS Pension Scheme and the BHS Senior Management Pension Scheme, both based in London. The latest figures show assets of £453.3 million and £105 million, respectively, as of March 31, 2015, the most recent data available. The pension funds had a combined £571 million deficit as of Jan. 23.
The pension funds entered PPF assessment in March this year, following a company voluntary arrangement, by BHS regarding its debts.
However, The Pensions Regulator spokesman said in an e-mail the regulator is “undertaking an investigation into the (pension funds) to determine whether it would be appropriate to use our anti-avoidance powers.”
The spokesman added: “Such cases are complex. There is a clear process that must be followed and this can sometimes take a considerable amount of time. We are unable to provide a running commentary on case investigations, or confirm the targets of our investigation.” However, where appropriate, the regulator will consider issuing a report of activities.
“Following the BHS (company voluntary arrangement) last month, we had been in discussions to find a solution that was in the best interests of the pension schemes and the company,” said Malcolm Weir, head of restructuring and insolvency at the PPF, in an e-mail provided by a spokeswoman. “However, following the BHS announcement that it has filed for administration, the PPF will now work with The Pensions Regulator and other parties to secure the best outcome for the pension schemes. Members can be assured they are protected,” Mr. Weir said.
Chris Martin, managing director at Independent Trustee Services and chairman of the trustees of the BHS pension funds, said in a telephone interview that the PPF assessment is ongoing. “Today’s events don’t change that; the (company voluntary arrangement) itself was an insolvency event. It is very unfortunate for the business and for those still working, but it doesn’t change the position for the pension schemes.”
Mr. Martin said the BHS Pension Scheme has about a £510 million deficit and BHS Senior Management Scheme, about £60 million.
“We are aware that the PPF and TPR are looking at the background and history of the schemes — as trustees we will provide them with support and information as appropriate,” Mr. Martin added.