Defined Benefit  

Pension consolidator approached by ailing retailers

Pension consolidator approached by ailing retailers

A consolidator currently being developed for the defined benefit (DB) market has received several approaches from schemes of ailing retailers, it has said.

Mark Hommell, head of origination at The Pension Superfund, said at a dinner event last night (24 July) trustees appeared concerned about the future of these schemes.

Several retailers had discussions with the pensions lifeboat regarding their restructuring plans, such as Mothercare, House of FraserCarpetright and Toys R Us – the latter entered PPF assessment after the company went bust.

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But Mr Hommell warned not all schemes may be able to meet the consolidator's strict funding criteria.

He said: "Some of these pension funds will end up at the Pension Protection Fund (PPF), and there might be something the trustees can do to avoid that.

"The question is if the sponsor [of the scheme] can afford the funding level that we would demand."

The Pension Superfund is headed by Alan Rubenstein, who was until January this year chief executive of the PPF.

Mr Rubenstein told FTAdviser in April The Pension Superfund will only accept fully funded pension schemes to guarantee it "is sufficiently strong to offer a high level of security".

For pension funds that are in a funding deficit, employers can pay the difference to the get the funding of the scheme to 105 per cent on the superfund basis.

The new consolidator, still in development, also received dozens of contacts from potential interested sponsors, Mr Hommell said.

The announcement of the creation of the superfund followed the government’s publication of its DB white paper, where it revealed plans to promote consolidation in the DB pension market, in which two thirds of the 5,600 schemes are deemed to have funding shortfalls.

Distressed schemes such as BHS and Carillion needed to be rescued by interventions from The Pensions Regulator, with some of them ending in the pensions lifeboat as the last resort to protect members’ benefits.

Mr Rubenstein, alongside Mr Hommell and Luke Webster, head of asset liability management, are the founding members of The Pension Superfund.

They teamed up with City financier Edi Truell's Disruptive Capital and private equity investor Warburg Pincus to launch the new scheme, which will accept bulk transfers from DB plans and consolidate them into one occupational pension scheme, and has already lined up an initial £500m of capital.

maria.espadinha@ft.com