BHS pension scheme: Sir Philip Green has said he will contribute £363m, but what happens next?
Sir Philip Green might be paying up £363m to sort out the gap in the BHS pension schemes, but that’s not the end of the saga for the fallen retailer.
What options do those with BHS pensions now have?
The 19,000 scheme members have three options to mull; transferring to a newly created pension scheme, cashing in their pension if it is below £18,000 or having benefits held and paid out by the Pension Protection Fund (PPF).
How will the new scheme be run?
The Pensions Regulator has revealed the scheme will be a fully independent trust, overseen by independent pension trustees and with independent governance.
"Neither Sir Philip Green nor the Arcadia group will be involved in the ongoing management of the scheme," the regulator added.
Will everybody get their full pension?
Despite the £363m handed over by Green, which consists of £343m to fund the new scheme and £20m to cover the admin expenses linked to setting it up, analysts say it is not enough to plug the shortfall.
Tom Selby, senior analyst at AJ Bell, pointed out scheme members will see about 12 per cent on average sliced from the benefits they would have received under the original terms of their pension plan.
It is also worth noting that the process of setting up the new pension scheme will take a number of months.
Would staff and ex-staff be better off staying with the PPF?
Selby believes not, remarking that not only does rescue of a scheme by the pensions lifeboat spell a 10 per cent cut in benefits for those under retirement age, its terms also include a cap on annual payments. He said the new deal should be treated as "welcome news" in that respect.
Jamie Smith-Thompson, managing director for pensions advice specialist Portafina, added the BHS pension scheme members now had more options open to them as to what to do with their retirement funds than they would have under the PPF.
"For example, if they wanted to transfer to a personal scheme that didn’t offer the promises being made by their final salary scheme (bearing in mind what has just happened) but did offer full ownership and control of their pension investments, they still could," said Smith-Thompson. "With high transfer values being offered for final salary schemes at the moment, I can imagine a number of members will be thinking seriously about this option."
Nathan Long, senior pension analyst at Hargreaves Lansdown, noted the new pension also comes with a 1.8 per cent increase per year for inflation proofing, which "looks pretty healthy given the current levels of inflation in the UK".
What does this mean for other firms with pension schemes with shortfalls?
Selby said the announcement is a stark warning for any company thinking of offloading an ailing pension scheme.
"This result will be viewed as something of a victory for The Pensions Regulator and acts as a warning shot to any bosses who think that, once they have sold their business, any obligation to pensioners disappears," Selby said.
Is this the end of The Pension Regulator’s action over BHS?
Green’s payment marks the end of one aspect, as the watchdog said its anti-avoidance enforcement action against Green, and the Taveta companies linked to the business tycoon, would now be closing. However, action still continues against Dominic Chappell and his Retail Acquisitions company, which purchased BHS from Green for £1 back in 2015.
What will happen to Sir Philip's knighthood?
Last October, MPs voted to ask the Honours Forfeiture Committee to consider stripping Green of his knighthood. It is down to the Committee to take that decision.