We learnt yesterday that the Pensions Regulator has reached an agreement with Sir Philip Green over the BHS pension deficit.
The payment of £363m is more than the £350m the PPF had proposed, but falls short of the £571m required for buy out. £20m of this voluntary payment will be made available to cover the cost of implementation of the new member options and new Scheme.
What can we take from this whole saga?
Firstly, the Regulator is not toothless. Whilst the additional £13m secured above the PPF’s proposal is just a drop in the ocean that Sir Philip’s yachts sail in, the total payment has avoided PPF entry and reduced future levies to all other scheme sponsors. Not only that, the benefits available to members in the new independent scheme are far better than what would be on offer if the original scheme had sank into the PPF (i.e. no 90% cap, pre 97 pension will receive increases, better death in retirement benefits). It’s a PPF plus… plus deal!
Secondly, we were probably naive to expect any better behaviour from Sir Philip. Gordon Gekko might have been disingenuous when he declared that ‘greed is good’ but it is true that hard-nosed capitalism oils the wheels of commerce and keeps the economy going. The cynical amongst us may suggest that mounting PR pressure and the potential loss of a knighthood have forced the hand.
Thirdly, it seems odd that UK corporate law did not require Sir Philip to check that Dominic Chappell had the wherewithal to at least have a chance of: (a) making a profit from BHS; and (b) funding the pension scheme over time.
Fourthly, the Trustees were unable to do more in advance of the deal? This is a surprise.
Our View: Something needs to change. The recent ‘Green’ paper… together with the Government’s Insolvency Service will hopefully find a solution. More powers for the Regulator and Trustees seem likely. Is a pensions version of Sarbanes Oxley out of the question?