Coronavirus: TopShop empire halts pension payments

Sir Philip Green’s TopShop empire is to halt payments to its pension scheme for months as retailers and other stricken companies conserve cash during the coronavirus pandemic.

Sky News has learnt that Arcadia Group, the parent company of high street brands including Burton, Dorothy Perkins and TopShop, is to defer a series of deficit recovery contributions agreed with pension watchdogs last year.

The move, which is understood to have secured the agreement of Arcadia’s pension trustees, comes amid an unprecedented maelstrom in British retailing, with liabilities including rent payments, business rates and tax contributions all being put on ice.

attends Topshop's London Fashion Week show on September 17, 2017 in London, England.

Sir Philip Green has struggled to recover after the collapse of BHS

Under the agreement that kept Arcadia alive last June, the company is due to pay £25 million annually into its pension scheme for the next three years – equating to monthly payments of just over £2m.

Those contributions are now said to have been postponed for at least three months – and possibly longer, depending upon the length of the COVID-19 shutdown.

While Arcadia is far from alone in seeking to bolster cashflows by reducing pension payments, Sir Philip’s history with the retirement schemes of his companies means it is likely to attract attention.

All “non-essential” retailers, largely comprising fashion and other non-food products, were ordered to close their doors immediately by the government this week.

Many chains have complained that the instruction will leave them on the brink of insolvency, even with the aid of a range of emergency government support schemes.

The Pensions Regulator, which rubber-stamped last year’s Company Voluntary Arrangement proposals, is aware of Arcadia’s deferral plan, according to insiders.

It was unclear this weekend whether part or all of a further annual £25m contribution to the scheme due to be made by Lady Green, Sir Philip’s wife, during the course of 2020 might also be deferred.

In guidance published late on Friday evening, regulators said defined benefit pension trustees should be open to considering requests from companies to reduce or suspend contributions during the current crisis.

“The significant measures and clear guidance we are announcing reflect the unprecedented and challenging situation trustees and employers find themselves in,” said David Fairs, director of policy at TPR.

“The current scheme funding regime is flexible enough to cope with the impact of a severe economic downturn.”

City sources said myriad companies would seek to agree reduced contributions in the coming days.

They warned, however, of the risks of companies which have been allowed to defer pension contributions not making it through the coronavirus pandemic.

That would leave schemes in an inferior position if their sponsor ultimately collapses.

Insiders also pointed out the hammering that equity prices have taken, as well as the sharp cuts to interest rates announced by central banks in order to stimulate major economies, would also be of profound concern to pension trustees.

Like many of its rivals, Arcadia has seen catastrophic falls in sales across its brands in recent weeks, even before the enforced closure of their stores.

Sky News revealed this month that the company was suspending rent payments to landlords, joining the likes of Burger King, New Look and Body Shop.

Sir Philip’s businesses employ about 18,000 people, making his operations one of the UK’s largest privately owned employers.

Arcadia, which made billions of pounds for Sir Philip and his family, was already struggling before the coronavirus outbreak.

He narrowly secured creditors’ support for a rescue of Arcadia last June, with landlords agreeing to back a CVA at the second attempt.

As well as the £175m cash contributions into Arcadia’s pension scheme it was also granted security over a further £210m of property and other assets.

In return, Arcadia signalled its intention to close dozens of stores and reduce rents at hundreds more.

As part of the reorganisation of his companies, Sir Philip paid $1 to buy back his private equity partner’s 25% stake in TopShop and Topman.

Like its rivals, Arcadia’s brands have been hit by shifting habits among shoppers and growing consumer caution.

It has been a tumultuous period for Sir Philip, who for years was feted as the king of the high street by politicians and the media but who struggled to recover his poise after the collapse in 2016 of BHS.

His sale of the department store chain a year earlier to Dominic Chappell, a former bankrupt, culminated in Sir Philip having to contribute more than £360m to fund its pension deficit after its collapse.

The tycoon’s miserable period has not only been restricted to the performance of his business.

Sir Philip also became embroiled in a storm over his behaviour towards Arcadia employees and his use of non-disclosure agreements to prevent former workers discussing their severance packages.

Arcadia and TPR declined to comment.