The UK’s Pensions Regulator (TPR) has secured a cash settlement worth up to £363 million ($446 million) with the former owner of the now-defunct British Home Stores (BHS) department store chain. The settlement will provide thousands of ex-BHS employees the starting pension they were originally promised.
Last June, BHS announced it would be shutting down operations, and by late August, it had closed all of its stores after 88 years in business.
As part of the agreement, which has the blessing of the trustees of the two BHS pension plans, BHS owner Sir Philip Green will provide funding for a new independent pension plan. The plan gives members the option of the same starting pension as they were originally promised by BHS, and higher benefits than they would get from the Pension Protection Fund (PPF). TPR is the regulator of work-based pension schemes in the UK.
“The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes,” said TPR chief executive Lesley Titcomb in a statement. “It takes account of the interests of both pensioners and the PPF, and brings a welcome level of certainty to present and future pensioners.”
The board of the new pension plan will be comprised of three professional independent trustees. Members of the current BHS plans will have three potential options: transfer to the new plan, opt for a lump sum payment if eligible, or remain in their current plan and receive benefits from the PPF.
The lump sum payment option will be available to members with small pots of up to £18,000 ($22,100) in total value. Those who choose not to take a lump sum and transfer to the new pension plan will be entitled to the same benefit structure as all other members. The new plan will also be eligible for the PPF.
“This settlement for the BHS pension schemes … relieves the PPF’s levy payers of the cost of meeting the initially reported shortfall,” said Alan Rubenstein, chief executive of the PPF. “The Pensions Regulator will be monitoring the new scheme and members will be protected by the PPF.”
The settlement funds are being held in segregated bank accounts: £343 million has been placed in an escrow account to fund the new plan, and up to an additional £20 million is being held in other accounts to cover expenses, and the costs of implementing the member options and the new plan.
“We are confident that the agreement we have reached with Sir Philip represents a good outcome for current and future BHS pensioners,” said Nicola Parish, Executive Director of Front Line Regulation.
TPR’s anti-avoidance enforcement action against Green, Taveta Investments Limited, and Taveta Investments (No. 2) Limited, will now cease, the regulator said.
“I would like to apologize to the BHS pensioners for this last year of uncertainty, which was clearly never the intention when the business was sold in March 2015,” said Green in a statement. “I hope that this solution puts their minds at rest and closes this sorry chapter for them.”
By Michael Katz
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