Teresa Hunter: BHS fiasco – any faith in pension scheme regulation has been blown away

Teresa Hunter

The Pensions Regulator has been found wanting in the BHS debacle

I always thought ‘P’ stood for ‘pensions’, but ‘pantomime’ seems more fitting in the light of the BHS debacle.

Not that the current pensions pantomime is very funny if you are hoping to retire – or already have – on a private sector final salary scheme.

The spectacle of a sharp-bladed business buccaneer side-swiping a pitiful pensions watchdog will have chilled the hearts of many. It certainly shone a spotlight on the feebleness of The Pensions Regulator, and on our misplaced faith that it would keep our pensions safe.

My guess is it will be years before all this finally unravels. But a clear narrative emerged from the Work & Pensions committee inquiry hearings. Enough, anyway, to begin writing the trailer for the film, sure to be made in a decade or so.

In a nutshell, in 2009 BHS was owned, one way or another, by flamboyant retailing entrepreneur Sir Philip Green, and it had a pension deficit and recovery plan in line with practice elsewhere, and which the regulator had given the thumbs-up.

By 2012 the fortunes of the group and the pension scheme had deteriorated. The company was intent on reducing the amount it was paying into the pension scheme by either offloading some liabilities onto a guarantee or moving from a nine- to a 23-year recovery plan.

If I were to say alarm bells immediately started ringing at the regulator, I would be turning up the volume significantly. Nevertheless, the company must have picked up that what it wanted to pay into the scheme was unlikely ever to match what TPR thought appropriate.

Thereupon it seems the Green family interests decided to exit BHS and its pension fund headache, before it brought down more successful parts of the empire, such as Top Shop.

There is the matter of the dividends: Sir Philip received £400m and his wife, Tina Green, £1.2bn.

How can this be right, ask critics, when the pension scheme now has a £571m black hole?

However, the complex web of companies, and restructuring deals including BHS and retailing group Arcadia – both ultimately owned by the Green family trust, Taveta – will have to be untangled before that question can sensibly be answered.

So is Sir Philip a crook? I’d put money on his not having broken the law. He may have a long record in ghastly shirts but there is no history of reckless and flagrant criminal activity. He is a focused operator – and, like many successful businessmen, will put his own interests and those of the successful parts of his empire before those of lame ducks.

Whether, when the final credits roll, he will be found wanting remains to be seen. In all likelihood – and by now he must know this – he will be asked to put his hands in his pockets and dig deep. Time will tell how deep.

My default position is always to blame the regulator. Why on earth spend a king’s ransom on regulation if it proves ineffective when it is most needed?

There are 6,000 final salary schemes still operating in the private sector, of which 5,000 do not have enough money to pay the pensions they have promised. If sponsoring employers can walk away from liabilities as easily as apparently happened at BHS, this is scary stuff indeed.

Certainly, anyone who watched the W&P committee hearings will have despaired at a regulator, paralysed like a rabbit trapped in a car’s headlamps, waiting to be flattened by the Green family juggernaut.

What was the watchdog doing as Green prepared to offload BHS to a third party not sufficiently substantial to meet the pension obligation? Not much. It wasn’t even aware that the deal was going ahead; the regulator read about it in the newspaper.

At this point, surely, any faith in pension fund regulation is blown away if there is nothing to stop an employer sidestepping their obligations and selling the debt to the lowest bidder; and with no duty to tell the regulator what it is up to.

Other potential targets include the trustees – but their options may have been limited. The demise of high-street retailing in general and of BHS specifically is also being blamed. After all, no one shops in BHS any more, do they?

Actually, I do. Its homeware department has the best towels, bedding and lighting for the price. And here’s another surprise: my daughter, who wouldn’t be seen dead in the places where I buy my clothes, such as John Lewis, Jaeger and M&S, likes the BHS brands such as Wallis.

Teresa Hunter writes for the Telegraph and Sunday Times