TPR outlines CVA expectations

The Pension Regulator (TPR) has published a report on its Arcadia Group intervention, outlining its expectations for employers in company voluntary arrangement (CVA) scenarios.

In its regulatory intervention report, the regulator emphasised that it “expects to be told at an early stage when a CVA is being considered that impacts a DB scheme”, highlighting that early and open engagement is key in order for TPR to work with the Pension Protection Fund (PPF) to assess the impact of the CVA.

TPR detailed the need for trustees and advisers to be “fully engaged and willing to work collaboratively”, highlighting that in the case of Arcadia, it had a constructive working relationship which resulted in a "significant" improvement in the mitigation offered to the schemes during the negotiations.

The report also stated that the challenges faced by Arcadia had highlighted the “importance of regulator monitoring” by trustees, as well as the need to ensure “adequate communication channels and information-sharing procedures”.

TPR outlined its involvement with Arcadia and the work undertaken over the last two years to prevent the firms' two schemes from entering the PPF.

Arcadia reached an agreement with trustees, TPR and PPF in June last year, which included a £100m cash infusion from the majority shareholder, to be paid in three installments over the next two years, backed by a guarantee arrangement, as well as a further £25m security.

The agreement represented security for assets totalling £210m for the scheme, and also acted as mitigation for the reduction in the deficit reduction contributions (DRCs) that were paid by Arcadia during the first few years of the CVA, which are expected to increase by pre-agreed amounts after three years.

Whilst the report confirmed that the scheme rescue had become binding on 6 October 2019, the Work and Pensions Select Committee has previously expressed concerns that the plan to rescue the Arcadia pension schemes could fail, querying the log-term security of the schemes.

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