Martin Hunter, Principal of Punter Southall Transaction Services, Xafinity Punter Southall comments: “It is unfortunate to hear that Toys R Us are yet another case of a business going into administration with pension members losing benefits.
“The PPF was a party to the restructuring agreement reached just before Christmas, which involved rent reductions and store closures. The PPF would no doubt have been hoping that a turnaround was possible, to keep the scheme out of the PPF, but sadly that may not end up being the case.
“While the members will no longer get the full benefits they were promised in the pension scheme, at least the PPF will step in to provide them with compensation. The scheme will not be particularly big in the context of the PPF, as it has around 600 members and reports have suggested that it has a PPF deficit of about £30m. In contrast, the PPF’s latest annual accounts suggest that it is currently in a strong financial position, with assets of £29bn and a surplus of £5bn. So if the scheme ends up in the PPF as part of the administration, it should not have a material impact on the financial position of the PPF.
“While the pension scheme was an important creditor of the business, it does not seem that the pension scheme has been the source of the company’s struggles. However, having a pension scheme will always complicate finding a solution. This may be another case where a rescue framework for pensions could have helped to provide more flexibility to a business and give members a better chance of receiving above PPF. We hope that the Government does look at this possibility as part of its White Paper.”
Darren Redmayne, CEO at Lincoln Pensions commented: “This is a sad but perhaps not unexpected outcome, given the problems faced by the business and retail sector in general. Despite the tough action taken by the PPF in securing scheduled payments of £9.8m as part of last year’s CVA, the business’ problems were insurmountable and the administrator will now work to secure as much value as possible for creditors. Although members will benefit from PPF protection, the £74m claim filed in the CVA and reported shortfall to the PPF of £37m demonstrates the importance of Trustees, companies, TPR and the PPF taking action to maximise outcomes in times of stress, even if full benefits cannot be achieved, and working together to protect member benefits in good times, as well as bad.”
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