Ritchie really is a knob, isn’t he?

To put it another way, Sir Philip Green, the man once asked by David Cameron to examine government spending and make recommendations for savings is planning to dump a massive liability that puts the well being of thousands of families in jeopardy on the state. You couldn’t make it up.

Amazingly, he does make it up. Firstly, Green has offered up to £80 million to aid in covering that pensions deficit. Money which he is under no legal pressure to supply at all.

Secondly, the Pensions Protection Fund is a statutory body, yes, but not paid for by the state. Defined benefit pensions funds pay a fee into the Fund for coverage by the Fund.

27 thoughts on “Ritchie really is a knob, isn’t he?”

  1. Excellent news, another Fair Tax Mark awarded. Is that 17 now? With 13 months of the 3 year business plan to go, well on the way to that 350 company target.

  2. @Noel Scoper

    You cynic.

    I believe it is 18.

    Some of which are neither co-ops nor tiny companies.

  3. I suspect that the PPF would struggle to survive one of the really big schemes joining it. Bunging up the levy on the survivors would just be a cruel positive feedback.

  4. When I was with the PPF (more than 2 years ago now) they had around £15bn to play with. This was the money needed to provide pensions for people in the schemes that had already fallen into the PPF as well as a little contingency for new schemes falling in.

    In contrast, the total deficits of all DB pensions that could fall into the PPF is estimated at over £300bn at Feb 2016. A few of these are really big, but if enough of the small ones fell in it would still be quite bad.

    It’s not necessarily all doom and gloom mind – they only need the cash to pay the benefits due now, so even if they had a big one fall in they’d be fine for a few years, and they were doing really well with their investments last I heard, so could pull out of it (that £300bn of deficit is made up of ~£1,250bn of assets vs £1,550bn of liabilities).

  5. @ dearieme
    Most of the really big schemes are either ex-nationalised industries where the government is liable for the shortfall in respect of the pre-privatisation scheme caused by Brown’s meddling, banks, oil companies, former FT30 companies that endowed them generously or things like Ford UK, large UK subsidiaries of foreign companies. The danger to post-mature schemes in a low-interest-rate environment is lower because they should be selling bonds to pay pensions when bond prices are high. [The schemes that are wrecked are those with lots of deferred pensioners who were made redundant when the factory closed where the money needs reinvesting and the reinvestment rate is a fraction of that assumed when the scheme was funded.]

  6. @ Rational Anarchist
    The deficit will only fall on PPF if the company goes bust while the scheme is in deficit (and, if it does, the pension scheme ranks ahead of suppliers in the pecking order).

  7. @john77

    True, but that’s happening to quite a lot of schemes at the moment. According to the PPF, as at Feb 2016 (link: http://www.pensionprotectionfund.org.uk/Pages/PPF7800.aspx)
    There were 4,923 schemes in deficit and 1,022 schemes in surplus.

    The £300bn figure is the total deficit of all schemes. It’s made up of about £50bn from schemes that are not in deficit at present, and £350bn for schemes that are currently in deficit. So really we should use £350bn as the total liability that the PPF may have to assume.

    I’d also note that there are 147 schemes that are currently in assessment for the PPF, and most of those will be expected to enter.

  8. @ Rational Anarchist
    BUT the exposure of PPF is to Deficit – Sponsor’s shareholders’ funds – its unsecured liabilities (other than employees’ wages). Have a look at some balance sheets. You will find that the pension fund is usually well protected.
    Do you not understand that the Pension Fund is only a longstop to protect pensioners if the employer dies (or, in the case of a company) goes out of business? The first claim is on the company’s assets and, as long as it is earning enough to pay employees, pensioners and suppliers, the value of the pension fund is largely academic (except when dealing with tax).

  9. Rational Anarchist – the net position is only relevant if there is a mechanism to strip surpluses from solvent plans and use them to fund the insolvent ones. In most cases, public insurance schemes don’t have that power, but I don’t know the specifics here.

  10. @ dcardno
    Sadly, there *is* a mechanism because the PPF is funded by a levy on all insured schemes, so the solvent ones are forced (thanks to Gordon ***** Brown) to fund the insoplkvent ones.
    This, naturally, creates moral hazard and companies are incentivised to pay out excessive dividends rather than pay money into their pension schemes.

  11. “the solvent ones are forced … to fund the insolvent ones”: that’s what I meant by positive feedback. Each scheme going phut increases the burden on the next, thus increasing its risk of going phut.

  12. Transfer of obligations rules?
    You sell the company for £1, but with a liability of £80M. Sounds like a scam to me, and I’d be surprised if the law hasn’t shut this stable door before.

  13. The BA and BT schemes alone are enough to cause problems. And there is no real guarantee there. That still hangs over their share prices.

  14. As I recall Mr Green’s ‘retail genius’ involved taking Arcadia private then doing a Sale and leaseback of its properties for $4bn via a SPV then promptly paying that $4bn straight back out to himself (his wife actually) via a dividend to Monaco. This left the company with an ongoing rental liability which has obviously proven too much. Unkind people might substitute ‘retailer’ with Asset Stripper. If they were being really unkind they might repeat the rumour that Mr Green, then recycled much of his wife’s money back into the UK via his long term ‘bagman’ Richard Caring (anybody seriously question where that guy’s huge wealth suddenly appeared from? Rag trade in Asia…hmmm). Referring to Annabels and the Ivy as “my Club” and “My restaurant” is a bit of a giveaway, but now that he is SIr Phillip, I guess no one is asking too many questions.

  15. @ diogenes
    It is a matter of public record that the government is on the hook for most of the liabilities of the BT scheme (BT got rid of thousands of employees after privatisation – one friend told me that they had taken out *five* layers of management).
    I assume that the same law will apply to BA and other privatised companies, which is why I commented thus.

  16. BT took it to the Court of Appeal and got a judgement that seems to imply that the Government Guarantee applies to scheme members who joined after privatisation in 1984. However the existing schemes closed in 1986, and have roughly 220,000 members (176,000 drawing pensions). There are 80,000 or so in the scheme that existed between 1986 and 2001. I would not be surprised if the government pulled up the drawbridge on that,if BT went bust. I imagine the other privatised companies are relying on that judgment. BA is probably the candidate most likely to call on the guarantee.

  17. The law is quite clear

    I suspect that it’s been put to Green that the state of the pension fund might cause some of the representations he made at the time of the sale of BHS to be investigated, and that it might be better all round if he made some effort to make them less untrue.

    What you might call legal pressure.

  18. As I recall Mr Green’s ‘retail genius’ … the rumour that Mr Green, then recycled much of his wife’s money back into the UK via his long term ‘bagman’ Richard Caring … Referring to Annabels and the Ivy as “my Club” and “My restaurant” is a bit of a giveaway …” Is there any chance that a crime was committed, buried in all this malarkey?

  19. dearieme……I have a rule of thumb that anyone who gets to be a billionaire – in terms of cash rather than daft multiples on unvested stock- needs to be examined extremely carefully, especially when they work in an extremely competitive industry like retail. Second rule is that when fat, fifty and balding starts hanging with the likes of Kate Moss it ain’t for the looks. PG certainly had a terrible rep in the past for dodgy biz practices, but once you get to hang with the molls and the Pols it’s knighthoods and no questions asked. While we are on scandal, there were also strong rumours that the Monaco yacht had a second one moored just behind with the full Wolf of Wall Street kit for those joining in the BoS funded leveraged party of the mid naughties. As to clubs, t’is certainly strange in a world of anti money laundering etc how nobody quite seems to know quite where perma-tan Caring suddenly got the money to buy all the toys that PG refers to so proprietorially. Asia rag trade is pretty weak story (as anyone who works there will tell you). We know about the asset stripping of BHS (think to be fair it was special dividends of 1bn not 4, but hey, who’s quibbling.?

  20. @ SJW
    That is not legal pressure – it is blackmail which is illegal pressure.
    Check the definition of blackmail.

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