Pension “Rescue Plans” are Unclear – Ralfe

John Ralfe Consulting CEO John Ralfe has issued an open letter that mentions the rejection of Sir Philip Green’s plans to resolve the BHS pension scheme.

The plan, which would have left several scheme members with better pensions upon implementation, would allow members to choose to transfer to a new scheme with lower pensions but having higher proportions in Pension Protection Fund compensation.

Ralfe highlighted the plan was rightfully rejected because it would be funded by Sir Philip’s family-controlled company that would inject cash into the scheme.

However, Ralfe highlights that precise details are understandably sketchy as the report did not highlight the amount of cash needed and the lack of testing for the pension scheme mechanism.

The letter was published in the Financial Times on 24 May 2016.

The entire letter reads:


Sir, You report that two years ago the Pensions Regulator rejected a “rescue plan” from Sir Philip Green for the BHS pension scheme, which could have left some scheme members better off ( May 20 ). Under the plan, members could have chosen to transfer to a new scheme with lower pensions than promised, but higher than the Pension Protection Fund compensation, with a company controlled by Sir Philip’s family injecting some cash into the new scheme.

Precise details are, understandably, sketchy, especially how much cash was involved, but the report fails to answer some obvious questions of principle: which part of pension legislation allows this to happen? Is this a tried and tested mechanism for pension schemes, which the regulator has already approved, or something entirely new? If there are other examples, how was BHS different?

Any implication that the regulator rejected Sir Philip’s offer capriciously and that things would have been very different had it been just a bit more helpful, strikes me as misleading.

You also say that the regulator would not comment, but you do not point out that the Pensions Act 2004 makes it a criminal offence for it to disclose any information obtained “in the exercise of its functions which relates to the business or other affairs of any person”, punishable by a fine or prison sentence of up to two years. This allows companies to give their version of events, knowing the regulator is forced to remain silent.