Former BHS owner Sir Philip Green has agreed a £363m cash settlement with The Pensions Regulator for the company’s pension scheme.

The result means that thousands of ex-BHS staff will be offered the starting pension they were originally promised. The arrangement has the support of the trustees of the two BHS pension schemes.

It follows reports in January this year that the regulator was days within reaching a £350m deal with Green after months of discussions.

The deal will see Green provide funding for a new independent pension scheme to give pensioners 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).

Today’s announcement brings certainty to the 19,000 members of the existing BHS pension schemes and closes TPR’s enforcement action against Sir Philip.

TPR chief executive Lesley Titcomb said: “The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes. It takes account of the interests of both pensioners and the PPF, and brings a welcome level of certainty to present and future pensioners.

“Throughout our discussions with Sir Philip and his team, we have always been clear that we were determined to achieve the right outcome for members of the schemes both in terms of the amount and the structure of the settlement.”

The board of the new scheme will be made up of three professional independent trustees to ensure there is continuing robust independent governance.

Members of the current BHS schemes will have three potential options: to transfer to the new scheme, opt for a lump sum payment if eligible or remain in their current scheme (and receive benefits from the PPF).

The lump sum payment option will be available to members with small pots of up to £18,000 in total value. Those who choose not to take a lump sum and opt to transfer to the new pension scheme will be entitled to the same benefit structure as all other members. The new scheme will also be eligible for the PPF.

All the settlement money is being held in segregated bank accounts. £343m has been placed in an escrow account to fund the new scheme. An additional amount of up to £20m is being held in other accounts to cover expenses and the costs of implementing the member options and the new scheme.

Communicating with scheme members will be a priority and TPR will continue to monitor the existing BHS schemes to ensure members are kept up-to-date on progress. The trustees will keep members updated, and, in due course, a helpline will be launched so that members can discuss their options with an independent financial adviser.

Last November, TPR issued Warning Notices to several targets outlining how it planned to instigate regulatory action as a result of its anti-avoidance investigation.

TPR executive director for front line regulation Nicola Parish said: “We are confident that the agreement we have reached with Sir Philip represents a good outcome for current and future BHS pensioners, and, as such, our regulatory action will now cease.

“In reaching such a decision, we have to balance the outcome of any settlement against what we might achieve by pursuing anti-avoidance action, the risk of a prolonged period of legal challenge in the courts, and the delay and uncertainty that would bring to members.”

TPR’s anti-avoidance enforcement action against Sir Philip Green, Taveta Investments Limited, Taveta Investments (No. 2) Limited, will now cease. Enforcement action continues in respect of Dominic Chappell and Retail Acquisitions Limited.

Green himself apologised to the BHS pensioners for the "sorry chapter".

“I have today made a voluntary contribution of up to £363m to enable the trustees of the BHS Pension schemes to achieve a significantly better outcome than the schemes entering the Pension Protection Fund, which was the goal from the outset.

"The settlement follows lengthy, complex discussions with The Pensions Regulator and the PPF, both of which are satisfied with the solution that has been offered. To achieve a significantly better outcome than entering the PPF, the contribution required to achieve this long-term solution was arrived at by the actuaries for both the regulator and the trustees.

"All relevant notices, including legal matters and claims from TPR, have been withdrawn bringing this matter to a conclusion. Once again I would like to apologise to the BHS pensioners for this last year of uncertainty, which was clearly never the intention when the business was sold in March 2015. I am also happy to confirm that any of the pensioners that have faced cuts over the last year will now be brought back to their original BHS starting level pension and will all be made whole."

PPF chief executive Alan Rubenstein said: “This settlement for the BHS pension schemes, agreed between Sir Philip, TPR and the trustees, with the involvement of the PPF, relieves the PPF’s levy payers of the cost of meeting the initially reported shortfall.

“TPR will be monitoring the new scheme and members will be protected by the PPF.”

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