The Pensions Regulator has published a report into its involvement with the BHS pension schemes. The report details the Regulator's involvement with the schemes both before and after BHS's insolvency, and sets out how the Regulator intends to use its powers more quickly and proactively in future in response to lessons learned from the BHS affair.


The Regulator had been involved with the BHS schemes for a number of years, including considering a corporate restructuring in 2014 which did not ultimately go ahead. The schemes' deficits had increased substantially over the 10 years before BHS became insolvent. In 2015 BHS was sold. The Regulator had known a sale was possible, but was not informed of the actual sale in advance of it being publicly announced. In early 2016 BHS became insolvent with its pension schemes in deficit. This meant that unless further funds were put into the schemes, members would go into the PPF and receive lower benefits than their scheme entitlement.

Following BHS's insolvency, the Regulator's dealings with BHS came under a lot of scrutiny, with some (including, publically, the MPs select committee) criticising the Regulator for being too slow to make use of its powers. In November 2016 the Regulator issued warning notices regarding its intention to use its "moral hazard" powers against BHS's former owner Sir Philip Green, to require him to contribute towards making good the schemes' deficit. The case was ultimately settled for £363 million. Under the settlement, members will receive better benefits than under the PPF, though not the full benefits that would have been payable had the schemes continued with a solvent employer.

Key messages for the future

The Regulator says it recognises it could have acted more promptly and been clearer in its expectations. In future it will:

• get actively involved more quickly in more funding cases in order to influence the outcome in advance of valuations being agreed;

• make greater use of its powers to impose funding arrangements on schemes;

• make greater use of its anti-avoidance (moral hazard) powers. The Regulator will consider reasonable settlement offers in such cases, but won't suspend investigations while it does so.


The Regulator is clearly very conscious of the criticism levelled at it in the wake of BHS. Sponsoring employers in scheme funding negotiations or contemplating transactions should be aware that in future the Regulator is likely to be much quicker to use its powers. These include both the power to require additional funds for the scheme where it considers that the employer covenant has been weakened, and the power of the Regulator to impose a scheme funding agreement itself. Employers should seek to anticipate scheme funding issues and work with their scheme trustees to reach agreements that will withstand regulatory scrutiny.