Laws and Rules of Accounting

BHS goes into liquidation – What does this mean for BHS pension payers?

As of 2nd June BHS is being wound down as none of the offers to takeover were deemed acceptable by the administrators. The past owners of BHS have been under severe scrutiny since entering administration, especially regarding the huge pension deficit that has been uncovered. Sir Phillip Green reportedly offloaded BHS for just £1 leaving a staggering £571 million deficit in its pension fund.

What does this mean for BHS and their pension payers?

The £571 million deficit in the BHS pension scheme was a lot bigger than its assets meaning BHS struggled to find backers or potential buyers leaving the pensions at risk.

Failure to secure new investment or a takeover means that that the pension schemes will have to be assessed for entry into the Pension Protection Fund (PPF) – an organisation established to help people get their pensions from a company in the event of insolvency. However, although the majority of the pension will be paid out, the pensions will not be paid out in full.

Members of the scheme who were aged over 60 before the 3rd March will be paid their pension in full. The remainder will receive 90% of what they expected and will therefore take a 10% cut in their pension and a cap in the payments could also be set.

The assessment period from the PPF can take a long time to process and until the PPF decides to take on the scheme, the pension will be paid as if it is under the PPF umbrella.

With auto enrolment currently being introduced across all businesses in the UK, this major high street story once again brings the matter of pensions into sharp focus. Whilst the scale of the BHS issue is significantly greater than anything our clients may encounter, it does once again act as a reminder to us all about the importance of making suitable provision for employer contributions and protecting your employees’ pension savings.

For further information and advice regarding pensions, auto enrolment or insolvency please contact Evans Weir in the first instance for a confidential discussion.