Pensions  

House of Fraser pension unlikely to need rescuing

House of Fraser pension unlikely to need rescuing

House of Fraser pension scheme members are expected to keep at least the vast majority of their retirement benefits after the company went into administration last week.

The Pension Protection Fund (PPF) is expected to announce an assessment period to look at the company’s two defined benefit (DB) schemes, but said it did not believe they would need rescuing by the pension lifeboat.

The PPF said it expected House of Fraser to be able to fund the schemes equal to or more than what the lifeboat fund would pay.

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Members of retirement age and above are expected to receive 100 per cent of benefits while those aged below the retirement age will receive 90 per cent.

They will not be able to transfer out of the scheme once the assessment period has started and the PPF said this would eliminate the risk of scammers preying on members.

A PPF spokesman added that after the assessment period, House of Fraser would probably buy out pension benefits with an insurer.

The department store went into administration last week (10 August) before a subsequent £90m buy out by Sports Direct tycoon Mike Ashley.

Martin Tilley, director of technical services at Dentons Pensions, agreed it was likely certain members would have their benefits cut by about 10 per cent.

He said: "The fact that members are now locked into the PPF means there is no ability to transfer out. This is a good and bad thing. It’s good because their benefits are now safeguarded and payable under the PPF’s terms so there is some certainty and assurances.

"The bad news is that members have now lost the ability to transfer out of the scheme and make use of the pension flexibilities for whom some may have benefitted. Those perhaps in poor health, or without spouses and dependents or other circumstances where in some instances a switch from DB to money purchase can be in their interests."

rosie.quigley@ft.com