BHS – The latest score between Philip Green and the Pensions Regulator
11 / 10 / 2016
Summary of the parliamentary inquiry
Since our last update on the BHS saga, in the July 2016 edition of Pensions Compass, the parliamentary inquiry and public sessions run by the Business, Innovation and Skills Committee (the Select Committee) have ended and Frank Field MP (Field), who sat on the Select Committee panel, has criticised Green on his lack of willingness to reach a settlement. The Select Committee concluded that Philip Green is largely responsible for BHS’s failure and that he is “the unacceptable face of capitalism” and Field and other politicians (with the support of tPR) originally demanded Green to pay £571 million to cover the cost of the BHS pension deficit. This figure, has however, increased to a staggering £700 million as a result of bond yields decreasing in recent months.
It has been an eventful summer for Green, who has, since June of this year been in negotiations with the trustees of the BHS Pension Scheme (the Scheme) and tPR, in an attempt to reach an agreement as to the amount Green should pay to fund the BHS pension deficit. Field, who originally opened negotiations with a figure below the estimated pension deficit, has since increased this figure. Green, on the other hand, has refused to increase his suggested contribution, which is apparently around £280 million. The amount currently under discussion falls short of the large figure originally demanded by the parliamentary panel, and is thought to be closer to £350 million (or less).
TPR’s involvement in the BHS investigation and negotiations with Green
TPR has been involved in its investigation of BHS since Green sold BHS to Dominic Chappell for £1. More recently, a spokesperson for tPR explained that their “focus is on achieving the best possible outcome for members of the BHS pension scheme and PPF levy payers” and that their negotiations with Green are ongoing. Green has denied allegations and suggestions that he has been trying to pressurise tPR to lower the amount he has to pay, and says he is following the process laid down by tPR accordingly. Green added that “I would like to apologise sincerely to all the BHS people involved in this sorry affair. Contrary to all the coverage I have been working on this issue on a daily basis, and will continue to do so with my best efforts to achieve a satisfactory outcome for all involved as soon as possible.”
Although all parties involved say they would like a deal to be reached as soon as possible, it is more likely that things will be pushed back to the end of the year as tPR is trying to find a way to force Green to increase contributions to the Scheme by tPR threatening to use its anti-avoidance powers. TPR commented that “Our anti-avoidance investigation continues and our chief executive has given a clear commitment that we will have made significant progress by the end of 2016. It’s important that we do not prejudice this complex case and are able to progress it quickly.”
So, what now?
The two possible outcomes for the Scheme trustees and members are: either Green and tPR will settle and Green will pay an agreed amount towards the pension deficit, or no settlement will be reached, in which case, tPR will initiate proceedings against Green. Should proceedings take place, tPR will issue a contribution notice to Green (and any other individuals who may be responsible to pay). Due to the complexity of the procedure, it could take years before an outcome is reached. Legislation surrounding this area is complex and as we look closely at how tPR approaches this and potentially has its powers increased, a new enquiry has been opened by the Select Committee, which deals with: tPR’s powers; the PPF; and scheme trustees’ role and powers. For a more detailed discussion on the Select Committee’s inquiry, please see the article Parliamentary Select Committee enquiry into defined benefit pension schemes: Show-stopper or damp-squib? written by Clive Weber.
A note to advisers
It is worth noting that since the Select Committee’s and tPR’s scrutiny of the events leading up to the demise of BHS (in particular the transactions that took place), all advisers (whether legal, actuarial or financial) have become more mindful of their actions when making such decisions. It has become apparent that: all advisers can be called as witness in such circumstances, where they need to account for certain decisions made (and done so publicly where any person can tune in via parliament’s website); and previous advice given can be made public (subject to privacy claims of privilege) and closely scrutinized by the Select Committee.
For further information please contact Grace Ho at email@example.com.