Mothercare and its pension trustees are holding talks in an attempt to save the schemes from entering the Pension Protection Fund as the company nears collapse.

According to Sky News, the talks are in an advanced stage and hope to plug a £139m deficit by shifting its two schemes from the UK subsidiary to its parent business.

The schemes have almost 6,000 members between them and Mothercare hopes to move them as part of a new funding plan.

If the plan is successful, it is unlikely that the scheme would have to be taken on by the PPF, where members would receive reduced benefits.

However, if the talks are unsuccessful and the pension scheme does have to enter the pensions lifeboat, the PPF wanted to assure its members that they would support them if needed.

A PPF spokesperson commented: “We are unable to comment on trading companies. Members of the Mothercare pension schemes can be assured that the PPF is there to protect them.”

In its most recent actuarial valuation in 2017, the pensions schemes posted a deficit of £139m.

Commenting on the potential plan for the scheme, Lincoln Pensions managing director, Dan Mindel, said that moving its two employee schemes to the parent company would “certainly be a good outcome for the scheme, especially since the group owns the profitable overseas part of the business”.

“The pensions industry in general will also be pleased to see members of a retail sector scheme achieve a better outcome than the PPF,” he added.

“For Mothercare, the situation has been brewing for some time and so all of the trustees’ contingency planning work will be coming into play. The directors of the sponsor also appear to have acknowledged that they owe duties to members.

“This can perhaps be attributed to the efforts of The Pensions Regulator, PPF and wider pensions stakeholders over the years in ensuring schemes are properly represented and supported in times of distress.”

In a Notice of Intent to appoint administrators to the company, Mothercare stated: “Since May 2018, we have undertaken a root and branch review of the group and Mothercare UK within it, including a number of discussions over the summer with potential partners regarding our UK retail business.

“Through this process, it has become clear that the UK Retail operations of the group, which today includes 79 stores, are not capable of returning to a level of structural profitability and returns that are sustainable for the group as it currently stands and/or attractive enough for a third party partner to operate on an arm's length basis.

“Furthermore, the company is unable to continue to satisfy the ongoing cash needs of Mothercare UK.”

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