Defined Benefit  

Pensions regulator in talks with House of Fraser

Pensions regulator in talks with House of Fraser

House of Fraser is discussing its recovery plan with The Pensions Regulator (TPR) and its impact on its defined benefit (DB) pension scheme.

The retailer announced yesterday (2 May) a deal with Hong Kong-listed C.banner International, which will become the majority shareholder in House of Fraser with a 51 per cent stake.

However, the agreement, which is expected to inject £70m of fresh capital into the group, is subject to House of Fraser restructuring, which includes considering the future of its stores. 

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According to FTAdviser’s sister newspaper Financial Times, the pension watchdog has been brought in to discuss the plan.

A TPR spokesperson said: “We are in discussions with the company and the trustee of the pension scheme and will continue to monitor the situation. We will not comment further unless it becomes appropriate to do so.”

The retailer's defined benefit plan, House of Fraser, Beatties and Jenners Pension Scheme, has two sections, the HoF section and the BJRB section, which is closed to new entrants and all future benefit accrual.

According to the retailer’s annual report, the last actuarial valuation, carried in 2013, showed a deficit of £71.3m for the HoF section.

The group has been paying deficit contributions (£6.5 in 2016 and £7 in 2017) which, along with investments and return seeking assets, are expected to make good this shortfall by 31 August 2021. The BJRB section has a surplus of £11.5m.

The Pension Protection Fund (PPF) is also expected to be involved in the process, since House of Fraser will be instigating a company voluntary arrangement (CVA), through which it will seek creditor approval to restructuring plan.

House of Fraser intends to launch a formal CVA proposal around the beginning of June. Pending creditor approval, the store restructuring is expected to conclude in early 2019.

A PPF spokesperson said: “We can’t comment on the circumstances of ongoing companies. The PPF provides a valuable safety net for pension scheme members if an employer does go bust.” 

FTAdviser understands, however, that the retailer has approached the pensions lifeboat for preliminary discussions.

The PPF was recently involved in the restructuring plan of Toys R Us. However, since the company filed for insolvency in February, the retailer scheme has entered in an assessment period at the pensions lifeboat.