Defined Benefit  

Pensions lifeboat approves Mothercare restructure

Pensions lifeboat approves Mothercare restructure

The Pension Protection Fund (PPF) is supporting Mothercare's restructuring plan, which has two defined benefit (DB) pension schemes.

The ailing retailer announced today (17 May) a plan to close 50 of its stores in the UK, which is being carried out through a company voluntary arrangement (CVA).

The CVA will need the support of its creditors, with the pensions lifeboat saying that it will vote in favour of such plan.

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The CVA proposals will trigger a Pension Protection Fund assessment period, during which the PPF assumes the rights of the trustees of the company's pension funds, including voting rights.

Malcolm Weir, director of restructuring and insolvency at PPF, said the pensions lifeboat welcomes that Mothercare "has been prepared to listen and take on board" the pension lifeboat's view that the CVA proposals should not be to the detriment of the pension schemes.  

He said: "Having received additional suitable assurances about the position of the pension schemes, we are able to support the CVA proposals as announced today (17 May).

"Our expectation is that the company will continue to take full responsibility for the pension schemes going forward. The PPF will always act robustly in any CVA in the interests of all pension scheme members and our levy-payers."

According to Mothercare's latest annual report, the final salary pension plans - the Mothercare Staff Pension Scheme and the Mothercare Executive Pension Scheme - which were closed to future accrual in 2013, had a deficit of £80m at 25 March 2017.

The retailer has a deficit recovery plan in place for both schemes, with annual contributions of more than £8m until 2022.

The Pensions Regulator (TPR) was also involved in the discussions between the retailer and the PPF.

The Pensions Regulator's spokesperson said: "We have been closely involved in negotiations with all parties and have played an integral role to ensure the company’s proposals offer the best outcome for members of the pension schemes in challenging circumstances."

Mothercare, which has been struggling for years, follows in the footsteps of House of FraserCarpetright and Toys R Us – all of which had discussions with the PPF.

Despite achieving a voluntary agreement with the latter for scheme repayments, the company went bust, and the Toys R Us Pension & Life Assurance Scheme has entered PPF assessment.

Discussions about the two other schemes are still ongoing.