Sir Philip Green has agreed to hand over £363m in cash to rescue the BHS pension scheme, and settle one of the biggest City rows of recent decades, The Guardian reports.
The deal with the Pensions Regulator, which is likely to help the billionaire keep his knighthood, follows the controversial collapse of the BHS department store chain last April, which led to the loss of 11,000 jobs and left a pension deficit assessed at £571m.
A high-profile parliamentary investigation into the demise of BHS concluded that the company had been systematically plundered by its owners and described the hole in the pension fund as “the unacceptable face of capitalism”. MPs voted in favour of stripping Green of his knighthood.
The billionaire tycoon owned BHS for 15 years until he sold it to Dominic Chappell, a former bankrupt, for just £1 in March 2015. During his ownership, the Green family and other shareholders collected at least £580m from BHS in dividends, rental payments and interest on loans.
Green said the settlement with the regulator, which is supported by trustees of the BHS pensions scheme, represented a “significantly better outcome” for former BHS staff than the scheme entering the Pension Protection Fund, the government’s pensions lifeboat.
He added: “Once again I would like to apologise to the BHS pensioners for this last year of uncertainty, which was clearly never the intention when the business was sold in March 2015.
“I hope that this solution puts their minds at rest and closes this sorry chapter for them.”
The pensions deal should calm the reputational storm which has engulfed Green, the self-styled king of the British high street. The 64-year-old fashion tycoon, who also owns Topshop, Wallis, Miss Selfridge and Burton, has been forced to curtail his public appearances since the scandal, including missing Topshop’s London fashion week show, where he usually has a front row seat.
Public anger over Green’s apparent reluctance to address the pensions gap focused on the tycoon’s £100m 300-foot superyacht, which was delivered as BHS collapsed, along with a new £46m private jet. He lost his temper on TV when approached in a Greek port by journalists and protesters fixed a “BHS Destroyer” banner to the yacht in harbour.
The pension settlement comes after the Pensions Regulator started legal action against Green last year in an attempt to force him to contribute cash to the pension scheme. This enforcement action has now been halted against Green, but legal proceedings are continuing against Chappell and his company, Retail Acquisitions, which acquired BHS from Green.
Lesley Titcomb, the chief executive of the Pensions Regulator, said: “The agreement we have reached with Sir Philip Green represents a strong outcome for the members of the BHS pension schemes. It takes account of the interests of both pensioners and the PPF, and brings a welcome level of certainty to present and future pensioners.”
Frank Field, the Labour MP who co-led the parliamentary investigation and led the calls for Green to make good the pension scheme, welcomed the deal. “I very much welcome this out-of-court settlement which is an important milestone in gaining the justice for BHS pensioners and former workers that we have been pushing for since beginning our inquiry into the downfall of BHS,” Field said.
However, BHS workers are still likely to suffer cuts to their pension benefits. The Pensions Regulator estimates that workers will on average receive around 88% of the value of their original benefits in a new pension scheme created by the settlement. This is a better outcome than if the BHS pension scheme had entered the Pension Protection Fund, a lifeboat for failed pension schemes, where workers would have received an estimated 75% to 79%.
Grant Atterbury, a former BHS worker, said the deal was “literally the least Green could do”. Atterbury is still unemployed and living on benefits after losing his job at the BHS in Royal Tunbridge Wells, Kent, last August.
“This deal is great news for pensioners but it doesn’t improve my lot,” he said. “It is literally the least Green could do. He filled his pockets with a great deal more than he’s putting back into the pension pot. He has filled the black hole in the pension but there are still a lot of black holes including one on our high street. My opinion of him is as low as it was.”
John Ralfe, a pensions expert, added: “This is not Sir Philip Green as the all-conquering hero. This is Sir Philip making the best of a bad job.”
Green initially pledged to “sort” the problems facing the BHS pension scheme last June when he was questioned by MPs.
John Hannett, the general secretary of trade union Usdaw, said: “It is difficult to understand why this saga has been allowed to continue and why we have had to campaign for so long to get justice for our members.”
The Pensions Regulator said measuring the BHS deficit as £571m was not appropriate when working on a cash settlement because this figure is based on what the retirement scheme would have to pay an insurance company to guarantee its liabilities – which is expensive.
Green has already paid over the £343m into an escrow account as part of the settlement. An additional £20m will be spent on expenses and implementing the changes to the BHS pension scheme.
The deal will see the creation of a new pension scheme, which will be funded by Green’s cash injection. BHS workers will have the option of moving their pension into the new scheme, receiving a lump-sum payment, or remaining in the existing pension scheme, which will enter the PPF and see a 10% cut to existing benefits.
As much as £15m could be returned to Green if 90% of the eligible members decide to accept the lump sum. About 9,000 of the remaining 19,000 former staff in BHS’s two pension schemes will be offered the lump-sum payments.
Trustees sent an letter to pension members on Tuesday. The members will all be contacted within the next three months with a personal offer and they will have three months to decide what to do with their pension money.
The new scheme will be run via a “special purpose vehicle” and will not be attached to a sponsoring company, which pensions experts claim is risky. It is the first time such a vehicle has been cleared by regulators in the UK and £100m was added to the settlement to reduce fears about the scheme falling back into the PPF lifeboat in future.
Chris Martin, the chair of the BHS pension fund trustees, said the cash injection from Green put the new scheme on a “stable footing”.
He added: “The trustees have carefully considered all aspects of the deal and we are confident that this is a robust scheme that delivers improved and sustainable benefits.
“We are now in a position to confirm that members will be offered benefit improvements, enhanced flexibility, and just as importantly, long-term sustainability for their benefits.”
Julie Palmer, managing partner at insolvency specialist Begbies Traynor, said: “Philip Green’s settlement with the regulator over the BHS pension is a triumph for the regulator and for public pressure, clearly demonstrating that even the most powerful entrepreneurs can’t afford to ignore their responsibilities to pensioners.”