Proposals to cut deficit recovery funding for the Arcadia pension schemes
Sir Philip Green has proposed to halve the pension scheme recovery payments, from £50 million a year to £25 million a year, as part of a planned restructuring of the Arcadia Group.
Denise Fawcett, partner in BDB Pitmans’ restructuring and insolvency team, comments on this development in an article for Pensions Expert.
She explains that it is not unusual for companies in distress to decrease contributions to the pension fund and extend the period over which any deficit is paid.
‘If this ensures the ongoing support of the scheme by the employer then this can be a good thing. However, if rescue is unlikely and the scheme’s position will merely worsen then the trustees of the scheme are unlikely to agree to a reduction in contributions.’
She said that if the employer does not survive, then the Pension Protection Fund will have to take on the burden of the pension plan.
‘If its position will worsen in circumstances where insolvency is likely then the trustees may need to consider whether they can call upon the company to pay the whole of the scheme debt, thereby forcing it into an insolvency process.’
The full article is available on Pensions Expert, here.