The Pensions Regulator (TPR) is facing scrutiny from parliament over proposals from Sir Philip Green’s retail empire to slash the payments it makes to its retirement scheme.
Sky News has obtained a letter sent by Nicola Parish, the watchdog’s executive director for frontline regulation, which discloses a series of interactions with Arcadia Group and its pension trustees.
The letter, which is expected to be published on Wednesday by the work and pensions select committee, was sent on 2 April – just days before Sky News revealed Arcadia’s efforts to halve its annual pension contributions to about £25m.
The Pensions Regulator was criticised by MPs for its engagement ahead of the collapse of BHS, the department store chain sold by Sir Philip in 2015 for £1.
The company collapsed a year later, with the tycoon eventually being forced to contribute more than £350m to repair its pension deficit.
Sources said that Ms Parish’s letter raised further questions about the intensity of TPR’s supervision of the Arcadia schemes, which has a deficit on a full buyout basis of about £750m.
In her response to an enquiry from MPs, the watchdog’s executive said it had “been in contact with the trustees of the schemes as well as with their advisers, including both face-to-face meetings and phone calls”.
She added that there had been “a tripartite meeting with the trustees and with representatives from the company, during which the company’s position was discussed”.
Ms Parish declined to provide further details of the discussions, while a TPR spokesman refused to reveal the number of times the regulator had been in contact with Arcadia or its pension trustees.
However, she hinted that any proposal to reduce funding by Sir Philip’s company, which owns Topshop and Dorothy Perkins, was likely to be frowned upon.
“We routinely maintain interest in the group’s current trading position and its trading outlook as those are likely to have a material impact on these discussions, in the context of the well-recognised difficulties currently faced by many high street retailers,” Ms Parish’s letter said.
A triennial review of Arcadia’s pension deficit is expected to produce a renewed valuation shortly, with sources saying that the current shortfall on a conventional funding basis stands at roughly £550m.
One source close to the work and pensions committee said MPs were likely to be concerned about the extent to which TPR had “a grip” on negotiations relating to Arcadia’s pension schemes.
Arcadia’s plan to cut its pension funding forms part of a wider restructuring that will entail the closure of dozens of stores.
Under the company’s initial proposals, retirement scheme members also face seeing their benefits reduced through a planned switch from RPI to the lower CPI measure of calculating annual payment uplifts.
Sources said that would eliminate as much as “a couple of hundred million pounds” from the deficit calculation.
Arcadia, which employs about 18,000 people, wants to implement store closures and rent cuts being implemented through a company voluntary arrangement (CVA).
CVAs have been widely used by retailers such as Carpetright, Mothercare and New Look in the last two years as trading conditions on the high street have deteriorated.
Debenhams, which went through a pre-pack administration on Tuesday before being taken over by its lenders, is also planning a CVA.
While the proposal to reduce Arcadia’s pension contributions risks further undermining Sir Philip’s reputation, a restructured business with lower overheads would have a better chance of surviving the current retail maelstrom.
Sir Philip is playing a peripheral role in the current talks and is said to be adopting an increasingly distant approach to the business which helped catapult his family into the ranks of Britain’s wealthiest people.
Advisers are said to be working towards a formal launch of the Arcadia CVA by early May, although the timetable could yet slip.
The financial restructuring comes at a delicate time for Sir Philip, who has been embroiled in a storm over his behaviour towards Arcadia employees and his use of non-disclosure agreements to prevent former workers discussing their severance packages.
In January, he dropped a legal battle against The Daily Telegraph’s publisher just before it went to trial, but has continued to deny all suggestions of “unlawful sexist and racist behaviour”.
Some MPs continue to push for him to be stripped of the knighthood he was awarded in 2006 for services to the retail industry.
Sir Philip’s Taveta Investments vehicle bought Arcadia in 2002, enjoying a golden period as Topshop became one of the most desirable brands on the high street.
In 2012, he sold a 25% stake in Topshop to Leonard Green & Partners in a deal valuing the brand at £2bn.
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