Defined Benefit  

Field demands answers from troubled pension schemes

Field demands answers from troubled pension schemes

Chairman of the Work and Pensions select committee, Frank Field, has written to two firms and The Pensions Regulator (TPR) demanding answers about the funding of their troubled defined benefit (DB) schemes.

Mr Field wrote to toy retailer Toys R Us and wholesaler Palmer and Harvey, as well as The Pensions Regulator's chief executive Lesley Titcomb to enquire about their financial affairs and recent activities.

Toys R Us filed for bankruptcy protection in the US in September and is believed to be in the process of signing a voluntary agreement that would see the closing of up to 26 stores in the UK.

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Mr Field accused the firm of waiving a sum of £584.5m in loans owed to it by a firm in the British Virgin Islands in the year ending January 2017, when it made a pre-tax loss of £673.3m.

The firm had stated in its accounts this was part of a "group reorganisation". 

At the same time the retailer’s defined benefit pension scheme deficit amounted to £18.4m, up from the £10.3m loss posted in the previous year, Mr Field wrote.

He asked the company to clarify the extent to which the the voluntary agreement would implicate the defined benefit scheme, as well as any action the company had taken to secure the interests of the scheme.

He also enquired about the firm's last full actuarial valuation of the scheme, which dated as far back as 2007.

In a separate letter to Ms Titcomb he asked for answers on the The Pensions Regulator's work with the scheme's trustees and any recovery plan that might have been put in place.

In his letter to Jonathan Moxon, director of Palmer and Harvey, Mr Field wrote he was concerned about reports of a possible £80bn deficit in the firm’s defined benefit scheme after it entered into administration.

This was exacerbated by evidence in the company's annual accounts that showed about £70m was paid out to shareholders in dividends between 2009 and 2016.

Mr Field wrote: "It would appear highly irresponsible that the company has been able to enrich preference shareholders to such an extent, especially given the sustained losses suffered by the company during that period."

Palmer and Harvey’s defined benefit scheme is set to enter rescue fund the Pension Protection Fund, meaning members could be exposed to pension cuts.

Mr Field demanded clarification on the current financial state of the scheme and any attempt by the trustees to challenge the payout of funds to shareholders.

He also asked for answers to the board's conduct on the matter.

In his corresponding letter to Ms Titcomb Mr Field enquired about any recovery plans being put in place by the company, given the scheme had been running a deficit every year since 2009.

He also asked whether The Pensions Regulator thought the dividend payments were acceptable.

"In retrospect, should the regulator have acted earlier to prevent the current situation arising," he wrote.