SIMON WATKINS
THE final curtain comes down on BHS this weekend (or should that be the final shutter?) as the group’s last stores close and its remaining staff head for the Jobcentre.
The pensions row will, of course, rumble on, but what may be crucial now is that the significance of this debacle extends far beyond BHS. The state of the UK’s defined benefit pension schemes is grim. The deficit across all pension funds is now reportedly more than £1 trillion.
The time has come for some truly radical solutions and perhaps Steve Webb, former Pensions Minister, has hit upon such a plan by proposing that some company pensions should be quickly transferred to the national rescue scheme, the Pension Protection Fund.
Normally a fund only goes into the PPF when its sponsoring company goes bust – as in the case of BHS – but Webb correctly points out that acting sooner might save everyone a lot of pain.
BHS’s pension deficit was far lower just a year ago. Had it transferred into the PPF at that time, the cost and risk to all involved might have been lower.
How many other companies are barely able to survive and are also labouring under obligations to a pension fund that realistically they stand no hope of ever returning to surplus?
Changing the rules as Webb suggests would be extremely controversial. It might smack of bailing out companies from their liabilities. Members of the funds in question would have to be convinced that joining the PPF – and taking a small cut to their pensions – might be less risky than ploughing on in the hope that their company could somehow make it good.
I am not yet convinced of the likely effectiveness of Webb’s idea, but it – or something like it – merits serious consideration.
Clearly it would not be acceptable if it became a way for companies and their shareholders to shuffle off their responsibilities. Nor would it be acceptable if scheme members – innocent victims of this situation – paid an onerous price.
Safeguards could be put in place to avoid this, but it would be foolish to believe that such a change in how the PPF works would not have some unintended consequences.
However, the pensions crisis this country is facing cannot be kicked down the road in the hope that something will somehow turn up to solve it. Anyone who claims otherwise is perpetuating the never-never-land approach that helped to create the financial crises we have faced since 2008.
Webb’s idea may not be the right one, but anything that is not equally dramatic seems unlikely to be capable of dragging our pensions out of the quagmire.