MPs' Report on the financial collapse of BHS: what are the key pensions implications?

MPs have published a report on the events leading to the financial collapse of BHS shortly after its sale by Sir Philip Green. As a consequence of BHS's insolvency, its defined benefit pension schemes will enter the PPF.

Much media attention has focussed on the personal role of Sir Philip Green, but the report makes clear that the issues around BHS encapsulate many ongoing concerns about the regulation and governance of businesses and pension schemes. Parliament, the Pensions Regulator and other regulatory agencies intend to return to the issues raised in the report.

Key issues raised by the MPs' report:

  • In the period immediately following Sir Philip Green's acquisition of BHS in 2000, large dividend payments were made, in one case following a restructuring which reduced the Group covenant. From 2006 the pension schemes had a combined deficit.  BHS informed the trustees of fixed pension budgets on a "non-negotiable" basis with no apparent regard to the sustainability of the schemes, leading eventually to a recovery plan length of 23 years.
  • Attempts at a restructuring of BHS and its pension schemes involving a "regulated apportionment arrangement" were put on hold when it became clear the Pensions Regulator wished to investigate using its moral hazard powers as an alternative.
  • The sale of BHS in 2015 to Retail Acquisitions Limited ostensibly on a "going concern" basis was in conflict with the terms of the attempted restructuring shortly beforehand, which had been predicated on there being a reasonable likelihood of the scheme entering a PPF assessment period in the following 12 months due to the insolvency of its employers. 
  • The directors of the purchaser accepted responsibility for the pension scheme with a "negligent and cavalier disregard for the risks and potential consequences". Their reliance on loans to finance the deal meant they had nothing to lose. The report stated that they should not escape regulatory investigation. 
  • MPs criticised the tendency among those involved to draw too much comfort from the presence of reputable advisers. The presence of reputable advisers does not absolve clients from exercising judgment. Some of the advice itself was criticised, although how fairly remains to be seen.
  • MPs concluded that weak corporate governance contributed substantially to the ultimate demise of BHS including failure to address the pensions deficit. The MPs were also concerned at the lack of transparency around large private companies generally and also the lower transparency requirements applicable to offshore companies. The Business Select Committee intends to look at issues around the adequacy of existing company law and corporate governance regulation, particularly in relation to large private companies.
  • The MPs' report suggests that the Pensions Regulator was slow and reactive only, and concluded that there may be a case for stronger and more proactive regulation of defined benefit schemes ("essential that it has the powers, resources, leadership and commercial acumen to act decisively"), but a balance needs to be struck to enable otherwise viable companies to continue to operate. Investigating how to secure a "fair and sustainable settlement" will be at the centre of the Work and Pensions Committee's ongoing enquiry.


The MPs' report on BHS raises a number of broader issues.  It appears likely that in the medium term we may see changes aimed at strengthening the powers of the Pensions Regulator (although its speed of response rather than lack of power to respond seems to have been the issue) and ensuring greater accountability on the part of directors, particularly directors of large private companies.  This makes it more important than ever that scheme employers and trustees ensure that scheme funding issues (whether arising due to a corporate transaction or in the context of day to day business) are not "brushed under the carpet", but are addressed in a manner that will stand up to subsequent regulatory scrutiny.