The Pensions Regulator (TPR) has fired a warning shot at Sir Philip Green by agreeing its biggest ever settlement with a private company in a case with similarities to BHS.
Coats Group, one of the biggest manufacturers of sewing threads in the world, has agreed to pay more than £255m into its pension scheme after the regulator started legal proceedings against it.
John Ralfe, a pensions consultant, said Green should feel “very, very uncomfortable” about the deal.
“This is the most important settlement the Pensions Regulator has ever reached,” he said. “With all other warning notices [of legal proceedings], the company is already bust, so the regulator has been picking over the carcass in the bankruptcy courts.
“There are clear parallels with BHS – the parent company has no legal obligation for the subsidiary’s pension scheme and there is no obvious breach of rules, but the regulator has been tough and got a large contribution from the parent.”
The regulator has started legal proceedings against Green and Dominic Chappell, the former owners of BHS, in an attempt to fill the £571m deficit in the retailer’s pension scheme. Last month, it issued warning notices to Green, Chappell and their companies outlining why they are liable to make financial contributions to the pension scheme.
TPR is understood to be seeking about £350m from Green. Six months ago, the billionaire tycoon promised to MPs that he would “sort” the problems facing the BHS pension scheme, but a deal is yet to be agreed.
Frank Field, the Labour MP and co-chairman of the parliamentary committee that investigated the demise of BHS, said: “What a fantastic Christmas gift it would be to the 20,000 pensioners counting on Sir Philip if he were to keep that promise now.”
It also emerged on Friday that Green is working on plans to open as many as 80 Topshop stores across China. Green owns Topshop alongside the US private equity firm Leonard Green.
TPR’s previous largest settlement was a £184m lump sum payment it won for the Lehman Brothers pension scheme after the collapse of the investment bank.
The pension schemes connected to Coats have a combined estimated deficit of £565m. The regulator issued warning notices to Coats in 2013. The dispute centred on the company’s plan to hand the bulk of the £700m it raised from the sale of assets and businesses to shareholders rather than the struggling pension schemes.
The settlement between Coats and TPR shows it could take years for the BHS saga to be resolved but also that the regulator is prepared to continue negotiations with a company about a deal even after starting legal proceedings.
Nicola Parish, the executive director of frontline regulation at TPR, said: “This is a substantial settlement of our case where neither the employers nor the targets were insolvent. It shows we can and will use our existing powers against a solvent employer if that is the right thing to do.
“This case is a great example of how, even after warning notices have been served, TPR, the company and the trustees can work together to achieve a good outcome for members without the need to formally enforce our powers through the determinations panel.
“We will continue to take a commercially minded and pragmatic approach when pursuing the use of our powers to achieve good outcomes for scheme members.
“In this case, the settlement will substantially improve the funding of the two schemes and also strengthen the employer covenant supporting those schemes.”
