A new scheme will provide certainty and higher benefits for BHS scheme members
The Pensions Regulator (TPR) has agreed a cash settlement with Philip Green worth £363m that will keep most BHS scheme members out of the Pension Protection Fund (PPF).
The cash will fund a new pension scheme with benefits lower than originally promised but higher than PPF compensation, for members to transfer into.
Members can choose to remain in the original scheme and enter the PPF, and those with pension pots of less than £18,000 have the option of taking a one-off lump sum.
The settlement, which has the support of the trustees of the two BHS schemes, brings to an end the regulator’s year-long pursuit of Green.
The agreement represents a strong outcome for the members of the BHS pension schemes
TPR chief executive Lesley Titcomb said: “The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes. It takes account of the interests of both pensioners and the PPF, and brings a welcome level of certainty to present and future pensioners.”
The schemes’ 19,000 members had been in limbo since the department store collapsed last April, following its sale by Green for £1 a year earlier.
TPR opened enforcement proceedings in the hope of getting Green to provide financial support to the schemes, which had a deficit of more than £500m.
The agreement announced today will create a new scheme overseen by three independent trustees, covered by the PPF.
All the settlement money is being held in segregated bank accounts, with £343m placed in an escrow account to fund the new scheme. An additional amount of up to £20m is being held in other accounts to cover expenses and the costs of implementing the member options and the new scheme.
Members of the new scheme will not be subject to the 10% reduction in starting benefits applied by the PPF, or the compensation cap that limits annual payouts to a maximum of around £34,000.
Death benefits will also be more generous and pensions earned before 1997 will increase in payment. Current pensioners will receive a lump-sum to make up for any underpaid benefits over the last year.
BHS Pension Trustees chair Chris Martin said the injection of cash would ensure long-term sustainability.
We have reached adeal which provides long-term certainty combined with the option of improved benefits
“The PPF has done an excellent job in providing a safety net for members, giving them certainty of pension income since the insolvency of BHS,” he said. “We have however now reached a final deal which provides long-term certainty combined with the option of improved benefits for members.”
“The Trustees have carefully considered all aspects of the deal and we are confident that this is a robust scheme that delivers improved and sustainable benefits.”
Martin said the trustees were now focused on communicating with members to make sure they understood the options open to them.
PPF chief executive Alan Rubenstein said the deal would relieve levy payers of the cost of meeting the scheme’s deficit.
“TPR will be monitoring the new scheme and members will be protected by the PPF,” he confirmed.
‘Our regulatory action will cease’
TPR investigated the collapse of BHS under its anti-avoidance powers, and issued Warning Notices to several targets in November.
Nicola Parish, executive director for front line regulation, said the watchdog’s pursuit of Green, and two linked entities, had been brought to an end by the agreement.
We are confident that the agreement we have reached with Sir Philip represents a good outcome
“We are confident that the agreement we have reached with Sir Philip represents a good outcome for current and future BHS pensioners, and, as such, our regulatory action will now cease,” she said.
“In reaching such a decision, we have to balance the outcome of any settlement against what we might achieve by pursuing anti-avoidance action, the risk of a prolonged period of legal challenge in the courts, and the delay and uncertainty that would bring to members.”
Although all parties have stressed this was a voluntary agreement, Royal London director of policy and ex-pensions minister Steve Webb said delays had caused needless distress.
“Sir Philip Green could have spared his staff many months of misery and uncertainty if he had stumped up the cash willingly, rather than only after many months of protracted negotiations.”
Enforcement action continues against Dominic Chappell and investment consortium Retail Acquisitions Limited, who bought BHS from Green.