House of Fraser, the 169 year old UK retailer, entered into administration last week (10 August) before a subsequent £90m buy out by Sports Direct tycoon Mike Ashley. House of Fraser employs around 17,500 people and has two defined benefit (DB) pension schemes with a surplus of £97M on an accounting basis and liabilities of £608M as of March 2018. Last week the Pension Regulator said it was too early to tell what Mr. Ashley’s decision to buy the retailer meant for workers and their pensions.
The UK’s pension lifeboat, the Pension Protection Fund (PPF), said that it expected to announce an assessment period to look at the company’s two DB schemes, but it did not believe they would need rescuing by the PPF. The PPF noted that it expected House of Fraser to be able to fund the schemes equal to or more than what the PPF would pay. This would mean members already at retirement age and above expecting to receive 100% of their benefits but those aged below the retirement age would receive only 90% (subject to certain caps).
During the PPF assessment period, members of the two DB schemes would be unable to transfer out of the schemes. Whilst this would protect members from potentially being lured into pension scams, it also restricts members’ ability to transfer out their pensions to access UK pension flexibilities via a money purchase scheme where beneficial in certain circumstances.
A PPF spokesman added that after the assessment period, House of Fraser would most likely buy out pension benefits with an insurer.