- Arcadia allowed BHS pension guarantee to lapse in 2012
- PPF left holding bill for £275m
- BHS pension recovery plan would have lasted 23 years – more than twice as long as average
The Pensions Regulator only found out that Sir Philip Green had sold BHS to Retail Acquisitions for £1 via the media, it emerged today.
The revelation was just one uncovered by a select committee joint inquiry looking into the collapse of BHS.
Pensions Regulator chief executive Lesley Titcomb told MPs on the Work and Pensions Committee and Business, Innovation and Skills Committee that, although the regulator was aware a sale of BHS could take place, it had no idea that it had been sold, or of Retail Acquisitions’ involvement, until reading about it in the newspapers.
She explained that she was unable to say whether the BHS pension trustees were aware of the sale, and only knew that she was not informed by any party.
This meant the provisions it made were unable to protect the BHS pension pot.
Titcomb said the regulator had immediately drawn up an ‘anti-avoidance’ case to investigate the pension scheme’s funding.
It also emerged that the previous owner, Sir Philip Green’s Arcadia, had allowed its BHS pension scheme guarantee to lapse in 2012 after the Pension Protection Fund (PPF) told the group the company’s assets were not as valuable as had been previously claimed.
The company, Davenbush, was a holding company within Arcadia. By having a guarantor, Arcadia was able to pay a smaller levy to the PPF.
The Business, Innovation and Skills Committee and Work and Pensions Committee also heard from the chief executive of the PPF, Alan Rubenstein.
When asked whether the guarantee was effectively worthless, Rubenstein said: “It wasn’t worthless, but it could not have withstood a claim for £200m [the deficit in 2012].”
This prompted Richard Fuller MP to ask whether the guarantor system was “all smoke and mirrors” and to question why the regulator had not launched an immediate investigation.
Rubenstein explained that the guarantor system had been systematically abused by companies with the aid of the main accountancy firms, which wanted to lower their PPF payments.
The PPF has been left holding a bill for £275m, according to Rubenstein. However, he said that a single scheme would not have the potential to bring down the fund.
The select committee also learned that, in contrast with the average eight-to-nine-year recovery plans most pension deficits require, the BHS rescue plan, agreed in 2012, had been due to run for 23 years.
It was accepted by Titcomb that this was “very atypical” but that it did not “meet the threshold” for an investigation to be launched, despite the regulator being concerned.
Despite knowing nothing of the sale, Titcomb termed the regulator’s relationship with former Sir Philip Green “constructive”, prompting Jeremy Quin MP to point out that a constructive relationship would have involved mutual respect and a healthy element of fear on behalf of companies towards the regulator.
He claimed that both were lacking in the dynamic.
Fuller told Titcomb: “For good reasons or bad, you don’t sound like much of a regulator.”
The joint inquiry is also due to hear from Green and BHS’s most recent owners Retail Acquisitions.
A separate probe is being run by The Insolvency Service, at the request of Business Secretary Sajid Javid.