McColl's pension schemes rescued following acquisition

The trustees of the McColl’s pension schemes have confirmed that the Wm Morrisons Supermarkets group has now completed its rescue of the TM Pension Plan (TMPP) and the TM Group Pension Scheme (TMGPS).

As a result, the two schemes have now formally exited their Pension Protection Fund (PPF) assessment periods, with Alliance Property Holdings Limited (APH), a subsidiary of Morrisons that now trades as McColl’s, to become the new sponsoring employer.

The schemes’ 2,000 members will also benefit from funding guarantees extended by the Morrisons group, with the trustees to continue to oversee the operations of the schemes.

In addition to this, the rescue will mean that members do not need to have a claim on the insolvency estate of McColl’s, meaning that other creditors of McColl’s are also likely to receive a higher distribution than they otherwise would have.

The schemes' trustees had previously urged bidders for McColl's Retail Group to respect the pension promises made to members, later confirming that the schemes would continue to receive support under the terms of Morrisons' acquisition of the group.

The schemes have combined assets of £130m, with TMGPS fully funded on a statutory ongoing funding basis, while TMPP is expected to become fully funded on a statutory ongoing funding basis next year.

Commenting on the news, Morrisons chief financial officer, Jo Goff, said: “We are very pleased to have completed the rescue of McColl's and to be able to offer stability and continuity for the whole business and, in particular, a better outcome for its colleagues and pensioners.”

PPF head of restructuring, Mike Ridley, added: “We’re pleased to have been able to support the trustees of the McColl’s Pension Schemes in completing this scheme rescue with Wm Morrisons Supermarkets group.

“While we provide a valuable level of protection to the schemes we protect, we’re pleased that on this occasion, both pension schemes can exit our assessment period having secured a good outcome for scheme members and our levy payers.”

Independent Trustee Services and McColl’s Pension Scheme chair of trustees, Rachel Croft, also highlighted the rescue as "great news" that represents "the best possible outcome" for members following the insolvency of McColl’s.

“The trustees have been actively involved throughout, to help secure this successful outcome, and would like to thank Morrisons and APH for their support for members, and their commitment in executing the rescue. We will continue to work to protect members’ interests," she said.

Adding to this, PwC UK pensions director, Minesh Rana, noted that scheme rescues like this are "incredibly rare", clarifying however that the current economic environment could see the number of companies in distress with well funded pension schemes grow.

He explained: “With current economic forecasts showing lower growth and costs rising, it’s possible more businesses will go into distress over the coming months.

"Historically in restructuring situations, the pension schemes of distressed companies often have significant deficits and this can result in the pension schemes ending up in the PPF.

“However, the recent improvement in gilt yields as well as cash contributions paid over many years has resulted in many pension schemes now showing smaller deficits or even a surplus.

"Therefore, companies in distress with well funded pension schemes could become more common, providing stakeholders with a greater range of options and solutions in relation to pension schemes in distress situations.

“Healthy collaboration, open communication channels and an engaged trustee board during times of distress can make a real difference in how deals are made.”

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