Editorial: I admit, I almost never go into the British Homes Stores shop on the high street of where I live. Neither do many other people, it seems.
I don’t go in mainly because I am worried that the customer lifts will come crashing down soon – creaking and with peeling paint, they are from another era entirely. On top of that, the shop floors are overheated, there are no windows, the lighting is unpleasant (akin to that of a warehouse) and I usually can’t find what I look for. I therefore head to the shopping centre opposite BHS.
Perhaps this amounts to beating someone when they are down, but it also shows how the company has failed to invest in its stores and online offering to attract customers. Another piece of British consumer history is joining the sad list of high street victims.
But sentimentality aside, there's more to this. There is the pension liability – what some corporations feel is a ball and chain that makes them less competitive internationally. Hymans Robertson has just published research that says one in seven finance directors view their defined benefit pension scheme as a major risk to their business.
What will happen to BHS's pension liabilities, and the deficit of nearly £600m? So far no deal has been struck with the Pension Protection Fund, which has said no offer was made that would fulfil its criteria.
Illustration by Ben Jennings
Some have started pointing the finger at the Pensions Regulator, as it did not intervene when the trustees of BHS presented a recovery plan – one that stretched over 23 years.
The average recovery plan of UK DB schemes is around eight years, and even that should be considered long.
Perhaps the system of putting in place endless recovery plans does need to be revised. Being allowed to run underfunded schemes can, as is evident in the case of BHS, turn into an issue of wider concern if the sponsoring employer becomes insolvent.
The Dutch model, where recovery plans can only stretch to three years but schemes can reduce benefits should this become necessary, is not ideal but certainly has its advantages – particularly for any pensions lifeboat fund and those who need to pay a levy for it when a large scheme needs help.
