Although Pensions News (PN) has not appeared for over three weeks, news about pensions appeared and kept on appearing for most if not all of the time that PN was sitting in the sun drinking Portuguese coffee.
Today’s edition is the first in the next series of PN. In preparing to write the current series of PN, PN has promised certain of his acquaintances that he will try to be more positive. PN gave this promise with some trepidation because he has, in a sort of a way and in the past, said he would be positive and being positive proved very difficult. We are, after all, talking about pensions and most “information about pensions” which qualifies as “news about pensions” has been negative or, at least, it has not lent itself to a positive approach. That point having been made, never let it be said that PN is not ready to accept a challenge so; here goes.
Before PN went on annual leave, he reported on the imbroglio (“imbroglio” is a word that PN and some of his most astute and sophisticated readers like to use and like to say out loud – do give it a try, it is Friday after all) that is the insolvency of BHS and the predicament that its pension scheme finds itself in; a predicament it is trying to get out of. Negotiations have continued between the Pensions Regulator (TPR) and others on one side and Sir Philip Green and his advisers on the other. On the positive side, nobody has reported that Sir Philip Green and Mr Frank Field MP have actually come to blows and on the still more positive side, it is apparent that Sir Philip has offered or is ready to offer a lot of money to “sort” (this is Sir Philip Green’s word, not the word PN would use) the deficit which exists in the BHS Pension Scheme. The sum quoted in the Financial Times and The Times as the sum Sir Philip is ready to offer is £300m. It is not clear whether £300m cash is about to change hands or whether a more complex arrangement involving cash and assets is being proposed. PN feels that, on balance, a more complex arrangement than the payment of cash (only) into the scheme is the more likely.
£300m would, not very long ago, have made a very large dent in the deficit in the BHS Pension Scheme. Going off today’s estimates however, £300m would cover a good deal less than half of that deficit. The scheme deficit has now, we are told, reached or exceeded (depending on whose newspaper one is reading) £700m. There are several explanations as to how a large pension deficit has increased in value by over £100m in a relatively short space of time to approximately £700m (PN says “approximately” since the figure is an estimate and, at this stage, can only be an estimate – albeit an educated one). The explanations are linked to another subject PN has discussed in previous editions; namely the decision by just over 50% of this country to leave the European Union. The main explanations are the (further) fall in interest rates, the fall in the value of the (now irrevocably) British pound and, it has been argued, further quantitative easing; each brought about, directly or indirectly, by the referendum result of 24 June. The reader, pausing for thought, may now be in the position whereby he or she can acknowledge how, three paragraphs in, PN is finding it difficult to be positive when it comes to news about pensions. Members of the BHS Pension Scheme must find it especially difficult to be positive about pensions.
Sir Philip has not been not been treated especially sympathetically by the assembled media. Some might say (and, indeed, some have said) that he should expect no sympathy. Sir Philip has been referred to as “Sir Shifty” by certain writers for that paragon of impartiality, the Daily Mail and he has been accused (by that same publication) of attempting to “blackmail” TPR by indicating that if he was going to hand over a sum as large as £300m (put differently, £300m would buy you just under 3.4 of the new midfield football player signed by Manchester United this summer), he expected TPR to stop its investigation into the BHS Pension Scheme and, especially, its demise.
Perhaps Sir Philip deserves some sympathy. He has, after all, not (or not yet at least) been found to have breached any law and PN would have expected that had he breached any law, there would have been evidence and that that evidence would have been produced by now. An argument has been articulated that Sir Philip is offering money because he feels guilty and that he feels guilty because he is, in fact, guilty. This argument, however, appears to have little substance. If he was guilty, Sir Philip is creative enough to think of other ways of dealing with it than offering the sum that has been quoted; £300m. In addition, although this is admittedly less convincing as reasons go, PN knows many people who were educated to feel guilty about nearly everything (you know who you are) and perhaps Sir Philip is one such person. What is evident is that it has been made clear to Sir Philip that, irrespective as to whether he has done right or wrong, he is expected to do something. Mr Frank Field MP, employing his own refreshing brand of bluntness, has indicated that paying a huge sum of money is effectively the price of the knight’s knighthood. Sir Philip has appeared to agree that something should be done and that he will do it (see previous editions of PN and above).
The story will go on. It will go on for at least the remainder of this year; not least as TPR is not expected to report on the BHS Pension Scheme until the end of the year and PN feels it highly unlikely that that body will agree to or decide not to report at all. That said, PN has been wrong about things in the past (PN thought in July, for instance, that Mr George Osborne would remain as chancellor of the exchequer) and he could be wrong about this.
By way of an acknowledgement to his more attentive and anxious reader, PN appreciates that he is in considerable danger of not delivering on the “positive” front so; here is a story about a man called Andrew (or “Andy” if you prefer) Haldane.
You, the reader, will recall that Andy Haldane is the chief economist at the Bank of England (BoE) and that he became as famous as he probably ever expected to be earlier this year when he announced that pensions were so complex that even he, chief economist at the BoE could not understand them. Mr Haldane consolidated his fame (in pension terms) a few days ago when he told a reporter that he felt pretty certain that property was better for retirement. Speaking to The Sunday Times, Mr Haldane said, in response to a question as to whether property or a pension was better for retirement, that “it ought to be a pension but it’s almost certainly property”. Mr Haldane has been criticised by so-called experts for making this statement but let’s not spoil the story by acknowledging them. Such people would, quite probably, hand over a gift horse to the local dentist. For those of you with property but no pension; you have it on reasonably good authority that you are doing the right thing. Just imagine if you could manage to have property and a small pension. Feeling better now?
Until next time……