Debenhams ‘in talks’ with Aviva to offload executive pension scheme

Debenhams is rumoured to be in talks with Aviva about a potential buyout of its executive pension scheme to guarantee its members’ future benefits.

First reported by Sky News, the talks are believed to be in an advanced stage to offload the scheme, which has around £200m in assets.

However, it is understood that the deal would involve just the executive scheme and not the main Debenhams scheme, which includes most of its workforce.

The department store chain entered administration in April 2019 before having a company voluntary agreement (CVA) approved by creditors the following month.

The CVA approval came after the scheme was assessed by the Pension Protection Fund.

As a result, the retailer plans to close 19 stores by 25 January 2020 and a further 28 stores over the next three years.

According to Sky News, sources said that the trustees of the main Debenhams scheme were hoping to complete a deal in the longer term with a defined benefit consolidation vehicle.

Commenting, Lincoln Pensions managing director, Alex Hutton Mills, said: “The trustees of the Debenhams group pension schemes have not had it easy.

"Seeing aggregate contributions of £9.5m fall to £5m per year in the 2017 valuation will have been a challenge, balancing the conflicting requirement of helping the sponsor achieve financial sustainability while meeting their fiduciary duties to the respective members.

"Should the executive scheme manage to reach a buyout with Aviva, or other insurer, it will perhaps be some reward for the executive scheme trustees’ flexibility three years ago.

"The question remains, however, of what happens to the main Debenhams scheme and whether the trustees there can negotiate an improved funding arrangement of their own?

"The buy-in, in the context of the turnaround plan, should provide some additional financial flexibility going forward, facilitating equitable treatment.”

The buyout involving the executive scheme could reportedly be completed within weeks.

When contacted, Aviva said that it did not comment on speculation.

Debenhams’ most recent annual report stated that the executive pension scheme was fully funded at its latest valuation in 2017.

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