Field questions TPR over Arcadia pension deficit

The Pensions Regulator is facing further questions with regards to the protections in place covering the Arcadia pension scheme, and in particular, its deficit.

In a letter sent to the regulator’s chief executive Charles Counsell, Thursday 6 June, following the adjournment of a meeting that took place Wednesday 5 June after the company’s proposed Company Voluntary Arrangement (CVA) was rejected by a landlord, Work and Pensions Committee chair, Frank Field, said that given the committee’s experience with BHS it is “very keen” to not see a “repeat of mistakes of the past”.

“You will understand that, given our experience with BHS, we are very keen indeed not to see a repeat of the mistakes of the past. We recognise that the best support for any pension scheme is a trading employer, and that you are alert to the risk of insolvency. Nevertheless, the adjournment of this week’s meeting is a useful opportunity for us all to reflect on the CVA proposals.”

The letter contains detailed questions on the part of the CVA that cover funding Arcadia’s pension deficit.

On 24 May, Field wrote to Arcadia owner, Philip Green, asking him to commit to replicating the funding he provided for the BHS pension scheme. The letter noted however that this was not until after lengthy intervention by TPR, and others.

Therefore, Field asked Green this time to "offer a guarantee to Arcadia staff that you would do the same for them should the deficit reduction plan prove insufficient." TPR was copied in on that letter to Green, and on the same day responded.

TPR stated: “We note that the shareholder is prepared to put an additional £100m into the schemes over a number of years to provide a short-term bridge for the cut in deficit recovery contributions. However, we do not consider the proposals as they currently stand are sufficient to ensure that members of the schemes are adequately protected”.

Since the letter from TPR, an additional £25m in the form of asset security has been offered to the trustees, however, this is less than the £50m in cash that TPR reportedly asked for.

In the 6 June letter, Field wrote: “As we understand it, the agreement you have secured consists of … total £385m. At the most recent publicly available update, the deficit in the schemes was between £537m and £727m … On the face of it, there would seem to be a substantial deficit remaining in the pension schemes.”

The agreement consists of £75m provided by Arcadia, £100m committed by Lady Green and £210m in the form of asset security.

Therefore, Field has asked that whatever the outcome of the vote, what action will TPR take to enable the trustees to secure further funding from shareholders for the pension schemes to further reduce and ultimately eliminate the deficit?

He also asked: “Which assets form part of the £210m offered as security and what is their current ownership status? More than half of the funding promised is in terms of security over assets. Do you consider that to be equivalent to cash funding? Your letter says that TPR has ensured that the schemes’ trustees ‘understand and use the powers and leverage that they have’. Might you please tell us … in particular what powers and leverage TPR would advise trustees of other schemes to use if they find themselves in a situation such as the one at Arcadia?”

Field has requested a response to the letter no later than 5pm on Tuesday 11 June.

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