Arcadia to halt pension deficit payments

Arcadia to halt pension deficit payments
Sir Philip Green, chairman of Arcadia Group

Arcadia Group, Philip Green’s retail conglomerate, is planning to defer the deficit recovery contributions agreed with the Pensions Regulator in 2019.

According to Sky News, the decision has been approved by the pension schemes’ trustees, as the parent company of Dorothy Perkins and Topshop and other retailers have been affected by the coronavirus pandemic.

Under the terms of the agreement reached last year, Arcadia agreed to provide security for the schemes to the value of £210m (up from an initial offer of £185m), which includes an additional £25m agreed with TPR.

Tina Green, Sir Philip’s wife, agreed to provide a voluntary contribution of £75m over three years to help close the funding deficit on the pension schemes, plus an addition of £25m, making a total of £100m.

The ailing retailer has two final salary plans with a combined deficit in 2018 of £537m on technical provisions, or £727m on a buy-out basis (the amount needed for an insurer to take on the liabilities).

FTAdviser understands that Lady Green’s payments will continue, while Arcadia’s will be deferred. In practice, instead of receiving £50m, the schemes will see a contribution of £25m.

On Friday, the regulator launched new guidance, which allows employers to freeze their defined benefit obligations for three months in response to the economic fallout from coronavirus.

However, Jonathan Camfield, partner at Lane Clark and Peacock, noted that trustee and employers should not “underestimate the work needed to ensure - and evidence - that it is appropriate to make use of the concession”.

He noted that the guidance points out “all the hoops that they expect trustees to go through before agreeing to these concessions”. 

“This includes ensuring that there is a legally binding commitment not to pay dividends during any suspension of deficit contributions. And on top of that, the trustees still have their general duties to do the best thing for members – and generally that won’t be deferring contributions other than in the more extreme cases where a business’ survival is in question.”

TPR and Arcadia declined to comment.

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