// Debenhams fails to make payment to its pension scheme this month as administration looms
// The department store chain is on the brink of its second collapse in a year
// The failure to top-up the pension scheme sparks fears that 10,000 members could be impacted
Debenhams has reportedly failed to make a top-up payment to its pension scheme this month, sparking fears that 10,000 members could be worse off amid a looming administration.
According to The Sunday Telegraph, the troubled department store chain did not make its April top up payment, which had previously been agreed with trustees.
A Debenhams spokesman confirmed with the newspaper that the money had not been transferred as per the agreement, and that permission had not been sought from the Pensions Regulator.
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- Debenhams defers concession payments for 30 days
- Debenhams calls for rent holiday to handle disruption
Debenham’s pension scheme is also reportedly in significant deficit.
The news sparks fears that 10,000 members on the pension scheme could be left out of pocket amid recent reports that Debenhams was preparing to line up administrators as early as this week.
A filing of a notice of intention to appoint administrators would be designed to protect Debenhams from legal claims from creditors during the Covid-19 pandemic.
This also includes the possibility of Debenhams seeking to avoid its obligations to its pension scheme members, prompting worries that the UK retail sector may have another BHS-like pensions scandal.
However, the Pensions Regulator had recently announced that companies could access a three month pension contribution holiday over the Covid-19 disruption period.
The sponsors of pension schemes can also hand over liabilities to the Pension Protection Fund (PPF).
Nonetheless, a Debenhams spokesman told The Sunday Telegraph that it would not to “dump” pension liabilities into the PPF, and that discussions with the trustees and the PPF were ongoing with the aim to secure a temporary suspension in contribution payments.
Debenhams pension schemes’ trustees was also engaged in talks “with a view to protecting members interests” and consulting with the Pensions Regulator, according to The Sunday Telegraph.
On Friday, news emerged that the 242-year-old retailer had placed accountancy firm KPMG on standby to handle a fresh insolvency process, although a firm decision for Debenhams to file for administration has yet not been made.
Should administrators be appointed though, it would mark 12 months since the struggling retailer last fell into administration, after which its current owner – a consortium of banks and lenders known as Celine – launched a CVA within the same month.
The potential administration would also come just days after Debenhams put the vast majority of its workforce on furlough after it was forced to temporarily close its stores due to the coronavirus pandemic.
The wages of staff on furlough are being covered for three months by the government’s Coronavirus Job Retention Scheme.
The department store, which employs around 22,000 people, said it intended to reopen the business after the lockdown and will continue to trade online for the time being.
Debenhams has hundreds of millions of pounds of inventory on order from suppliers that it no longer requires due to the government-mandated order that all non-essential shops must shut to help curb the spread of the highly contagious Covid-19.
In addition, last month the retailer wrote to landlords asking for a five-month rent holiday and additional store closures as part of its ongoing CVA launched a year ago,so as to avoid becoming the next retail casualty from the pandemic.
Debenhams fell into administration in April last year after a tumultuous period that saw retail tycoon Mike Ashley, who was the department store chain’s biggest shareholder at the time, attempt a boardroom coup before Celine took control.
The CVA, which was approved a month later, included rent cuts of 25 per cent to 50 per cent on some stores and around 50 stores earmarked for closure.
The first tranche of store closures – 22 sites – took place in January, well before the coronavirus outbreak became a pandemic and sent the UK into a state of crisis.
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