Concerns are mounting over the impact that retailer Arcadia Group's collapse will have on its pension funds, with the chairman of the U.K. Work and Pensions Committee now asking The Pensions Regulator to get involved.
Arcadia collapsed into insolvency on Monday. The business has been the focus of scrutiny over recent years due to its pension deficit, though the size of its pension fund and the deficit were not available.
In 2019, a £385 million ($512 million) package of contributions was worked out between the regulator, Arcadia and the owner of Arcadia, Lady Christina Green, to cover the funding gap of the Arcadia Group Pension Scheme and the Arcadia Group Senior Executives Pension Scheme, both based in London. The package included a £100 million guarantee from Ms. Green, annual payments of £25 million from the Arcadia Group and an additional £210 million that would secure the benefits of 9,500 participants.
Following the collapse of Arcadia on Monday, Stephen Timms, chairman of the Work and Pensions Committee, wrote to TPR Chief Executive Charles Counsell to outline how future contributions will be paid to the Arcadia Group pension funds, given that Arcadia is now unable to make any further deficit contributions.
Mr. Timms requested a timeline of when contributions could be paid. He also asked the regulator to give an indication of what assurances participants will be given on the timeline of these payments.
Mr. Timms also asked how the deficit reduction contributions of the Arcadia Group plans have been affected by TPR's March guidance on DB funding and investment during the COVID-19 pandemic, which allowed for delays in making payments.
He also called on the Green family to secure participants' benefits. "There is unquestionably a moral case for the Green family to do the right thing and guarantee Arcadia's hardworking staff what is rightfully theirs, whatever happens this Christmas. But the pensions regulator must also ensure that it is doing everything in its power to fight the corner of the pension scheme members," he said in a comment on the U.K. Parliament's website.
An emailed statement by TPR said: "We have received the letter from Mr. Timms and will be responding to it in due course. 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."
The Pensions and Lifetime Savings Association voiced its concerns over the situation in an emailed statement Tuesday. Joe Dabrowski, head of defined benefit, local government pension schemes and standards, said: "The news of the Arcadia Group entering administration will be incredibly worrying for its thousands of current workers and pension scheme members. There will be plenty of talk about the pension scheme deficit and whether that will be filled by Sir Philip Green."
Mr. Dabrowski said that final salary pensions will be protected by the £32 billion Pension Protection Fund, London, which is the lifeboat fund for plans of insolvent sponsoring employers.
"We call upon regulators to act urgently to ensure that members are protected and to take the strongest possible action against any unscrupulous companies that may look to take advantage of savers," he added.
A spokesman for the Arcadia pension funds said in an emailed comment that the collapse of Arcadia "is obviously very disappointing news for members of the schemes."
He said the trustees are in ongoing discussions with Arcadia and its administrators and are working with TPR and the PPF "to fully understand future plans for the business and to ensure that members' interests continue to be protected.
"The trustees' priority continues to be to support the schemes' members," he said.
The trustee will work to keep participants updated as quickly and effectively as possible with further information. "Members can be assured that, in the meantime, all pension payments will continue to be paid on their normal, due dates," he added.
A spokesman for the PPF said in a separate emailed comment: "Insolvency events are a concerning time for employees and scheme members and we want to assure the members of Arcadia's defined benefit pension schemes of our ongoing protection. The robust negotiations at the time of the company voluntary arrangements (agreed) last year have ensured that both schemes are now in a better financial position."