The collapse of BHS is likely to harden attitudes between trustees, members and sponsoring employers, leading to tougher fund negotiations over the next cycle says PTL.
But PTL managing director Richard Butcher says that while the burden BHS will place on the Pension Protection Fund will lead to calls for a new approach, the government and the industry should not succumb to ill-conceived knee-jerk reactions.
Butcher says: “We are only a couple of weeks into the BHS saga, but already the story is starting to sound like the script of a pension disaster movie. If it wasn’t for the loss of pension rights for the innocent members, a disinterested party might find it entertaining to watch.
“Back in the early 2000s there were a couple of very high profile business collapses, with the consequence that workers lost accrued pension rights and the Pension Protection Fund and its time-limited predecessor, the Financial Assistance Scheme were created. The PPF is, of course, today an established component of the pension world – although now perhaps at risk because of the size of the BHS problem – but we really need to avoid other, ‘knee jerk’, legislations designed hastily off the back of each event.
“What is clear from the aftermath of all this and in the intensity of the scrutiny, is that every party in any DB funding process: trustees, employers and the regulator, will be tempted to become more conservative, more hard line, and their actions more aggressive . We are all in for a far tougher, far rougher round of funding negotiations over the next cycle.”