This is a very similar story to the woes of the BHS Pension Scheme that occurred in 2016.
In simple terms, following the collapse of the Arcadia Group, the Arcadia Pension Scheme’s funding level will be assessed to see if the Scheme’s assets are higher or lower than the value of Pension Protection Fund (PPF) compensation of all the Scheme’s members.
If the assets are lower the likely outcome is that the Scheme will fall into the PPF and members will receive PPF compensation, which is generally around 10% lower (and certainly no bigger) than the benefits they would be entitled to under the Arcadia Pension Scheme.
If the assets are of a higher value then the Scheme would not enter the PPF but would generally be bought out with an insurance company who would administer the Scheme and pay out benefits. However, the Scheme’s assets are not likely to be big enough to meet the full benefits promised to Scheme members and so members would get benefits that are lower than their Scheme entitlement but higher than PPF compensation.
It appears that the PPF is the most likely outcome as things currently stand. However, if Philip Green the owner of the Arcadia Group was to pay money into the Scheme, as he eventually did for the BHS Pension Scheme after much pressure then this could mean the Scheme may not enter the PPF and members could get better benefits.
Unfortunately all of this takes time and so at present if you are a member of the Arcadia Pension Scheme you will be uncertain as to the level of pension you are likely to receive, which could be very distressing especially for those who have just lost their job.
The only silver lining is the PPF, which was set up in 2006, as without this, the level of benefits members end up with could be far lower than the minimum PPF compensation they are entitled to and that does not bear thinking about.
Stuart Price, Partner and Actuary at Quantum Advisory, Cardiff