Defined Benefit  

Pensions regulator in talks with Debenhams

Pensions regulator in talks with Debenhams

The Pensions Regulator (TPR) is in discussions about the potential impact of highstreet retailer Debenhams entering a restructuring plan with the trustees of its pension schemes.

Media reports over the weekend suggested the retailer was considering turnaround plans which could involve store closures, and a company voluntary arrangement.

The retailer has two defined benefit (DB) pension funds, the Debenhams Executive Pension Plan and the Debenhams Retirement Scheme, which both closed to future accrual in 2006.

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While the former is fully funded, the latter is currently undergoing recovery action.

A spokesperson for The Pensions Regulator said: "As part of our role to protect member benefits, we are in discussions with the trustees to understand the potential impact on the Debenhams pension schemes of any possible restructuring plans.

"We are not commenting further at this stage."

Ricky Chan, director and financial planner at IFS Wealth and Pensions, said he did not see any real danger to scheme members at this point. 

He said: "Even if the worst came to worse and Debenhams did go bust, most active members are likely to still 'okay' because of the Pension Protection Fund, which provides compensation to members of eligible defined benefit pension schemes.

"They’d still likely retain 90 per cent of their pension benefits, subject to a compensation cap and with certain restrictions applied. 

"For those that are already past the scheme’s normal retirement age, their pension benefits would be unaffected."

Debenhams’ shares fell by as much as 19 per cent to an all-time low early on yesterday (10 September) over concerns about its turnaround plans.

After a statement from the retailer indicating that it expected pre-tax profits to be within current forecasts, the shares recovered, but still closed down 10 per cent lower at 11.50p.

According to its last actuarial valuation, concluded on 31 March 2017, the Debenhams Executive Pension Plan was fully funded on a technical provisions basis - which measures the extent of liabilities in relation to past service as they fall due.

The Debenhams Retirement Scheme had improved since the previous actuarial valuation but remained in deficit, the company said in its 2017 annual report.

The value of the shortfall wasn’t disclosed, but the retailer agreed a recovery plan for this plan which was intended to restore the scheme to a fully funded position on an ongoing basis.

Under that agreement, Debenhams agreed to contribute £5m per year to the pension schemes for the period from 1 September 2017 to 31 March 2022.

Several retailers had discussions with the watchdog and also the Pension Protection Fund (PPF) regarding their restructuring plans, including MothercareHouse of FraserCarpetright and Toys R Us – the latter entered PPF assessment after the company went bust.