BHS Contents

3Pension schemes

17.BHS has two defined benefit pension schemes: a main scheme and a senior management scheme. The schemes are managed separately from BHS by a board of trustees who act in the interests of the beneficiaries. Trustees are responsible for collecting contributions from both the members and the sponsoring employer, investing assets and paying benefits.27 Defined benefit pensions are a form of deferred pay.28 Trustees are tasked, among other things, with working collaboratively with the employer to attempt to ensure that those pay promises are met.

18.Work-based pensions are regulated by The Pensions Regulator (TPR). TPR is expected to protect the benefits of scheme members while minimising any adverse impact on the sustainable growth of the employer.29 TPR also has an objective of reducing the risk of the Pension Protection Fund (PPF) having to pay compensation.30 Subject to certain conditions, the PPF provides compensation to members of defined benefit pension schemes if the sponsoring employer enters insolvency and there are insufficient assets in the scheme to pay PPF levels of compensation. Those levels are lower than the pensions promised by the employer.31 The PPF is funded by a risk-based levy on eligible schemes.32

Growth of BHS pension deficits

19.Table 2 shows trends in the health of the BHS pension schemes. The schemes were in a combined surplus of £43 million when Sir Philip Green bought BHS in 2000. The surplus gradually declined and the schemes fell into combined deficit in 2006, following the period when large dividends were paid to the Green family. By the time of the sale in 2015 the value of the schemes’ assets was almost £350 million short of the liabilities.

Table 2: Trends in BHS pension surplus/deficits

20.Following the proposal by BHS of a Company Voluntary Arrangement (CVA) on 3 March 2016, the pension schemes entered a period of formal assessment for entry into the PPF.33 The deficit for the purposes of Section 75 of the Pensions Act 1995, an estimated cost of purchasing annuities to guarantee promised benefits to each member of the schemes, was £571 million.34 Recent falls in expectations of future interest rates act to reduce expected returns on pension scheme assets and have therefore further increased deficit estimates.

21.BHS declined to make the employer contributions necessary to maintain the sustainability of the pension schemes over the duration of Sir Philip Green’s period in charge.35 The chair of the board of trustees from 2000 to 2013, Dr Margaret Downes, was concerned enough about the declining state of the schemes in 2005 to write to the then Chief Operating Officer of BHS, Paul Coackley, seeking written assurances of the company’s long-term commitment to the schemes, including paying the requisite contributions.36 Assurances on those terms were not forthcoming.37 Trustee demands for increased contributions were initially resisted on the grounds that investing in the business would be more lucrative and then, when BHS’s struggles intensified, on the grounds they could not be afforded in a company that was, in the words of Mr Coackley, being “stripped to the bone”.38 The company also repeatedly rejected demands for the pension schemes to take security over company assets. Attention was, however, paid to trying to reduce BHS’s PPF levy. This first took place through the avoidance mechanism of a guarantee from Davenbush Ltd, a related company, which on review the PPF deemed not to provide the purported substantial reduction in risk.39 Then, when the levy was adjusted upwards, a “very aggrieved” Sir Philip sought to lobby the then Pensions Minister in a “rather aggressive” manner.40

22.Negotiations over the deficit recovery plan relating to the 2009 valuation of the schemes began with the company maintaining that it had a fixed pensions budget of £6.5 million.41 This figure was calculated with no apparent regard to the sustainability of the schemes. TPR investigated the plan because of concerns about the length of time—12 and a half years—it would take the scheme to become fully funded, and because of some of the optimistic assumptions used.42 While many schemes fared badly in the light of the 2008 financial crisis, the BHS schemes weakened more markedly than their comparators.43

23.The 2012 valuation followed a similar pattern. Sir Philip insisted that £10 million, which would be provided by a loan from the wider Taveta group,44 was the maximum annual contribution the employer would make. The trustees were unable to negotiate any concessions.45 The arithmetic consequence was a 23 year recovery plan.46 This was an extraordinary length of time to recover a scheme in distress: 8 years was the median at that time, while 95 percent of comparable schemes had a recovery plan of less than 17 years.47 The payments barely covered the interest on the schemes’ deficit and that deficit continued to grow in the light of this agreement.48

24.Sir Philip told us that he had no involvement in the pension schemes before 2012.49 He suggested the trustees had made “stupid, stupid, idiotic mistakes” and were “asleep at the wheel” of the pension schemes, given he would have been willing to offer much larger contributions earlier had he been aware of the growing deficit.50 Sir Philip, however, made repeated representations to the trustees on their investment strategy between 2002 and 2008.51 His trusted senior finance directors Paul Coackley and Paul Budge were in even more regular contact with the trustees.52 Sir Philip also investigated the possibility of an insurance company buy-out of the schemes on multiple occasions during that period.53 The board of Taveta considered regularly and in detail the 2009 valuation of the BHS pension scheme, including the size of the deficit, the level of contributions and the withholding of security.54 Sir Philip Green was present at those meetings. The BHS company accounts, for which as a director he was responsible, included information on the pension deficit in each year.

25.When Sir Philip Green bought BHS, the pension schemes for which he became responsible were in surplus. As these schemes declined into substantial and unsustainable deficit he and his directors repeatedly resisted requests from trustees for higher contributions. Such contributions were not charitable donations: they were the means of the employer meeting its obligations for deferred pay. We reject any assertion that Sir Philip was not aware of the growth of the deficit: he had a responsibility to be aware and he was aware. That there is a massive deficit is ultimately Sir Philip Green’s responsibility.

26.The 23 year recovery period for the pension scheme established in 2013 was extraordinary. The annual payments of £10 million, which were calculated with no apparent regard to the sustainability of the scheme, were presented to the trustees as a non-negotiable offer. The payments were wholly inadequate and the deficit continued to grow.

Project Thor

27.Project Thor was a proposed solvent restructuring of the BHS business. It was devised by Deloitte, who were appointed by Taveta to advise on it in November 2013.55 Thor included several strands:

a)writing-off intra-group BHS debt;

b)renegotiating with landlords and suppliers; and

c)restructuring the pension schemes.56

Successfully implemented, Thor would have made BHS a more sustainable business. It would also have made it a more attractive proposition to a potential purchaser.

28.An initial proposal for Thor was presented to Chris Martin, the new chair of trustees of the pension schemes, on 29 January 2014. He was told that, as Taveta would no longer support BHS, the company would go insolvent, and the schemes into the PPF, unless Thor was implemented.57 Scheme members with pension pots with a capital value of up to £18,000 would be given the option of receiving a lump sum payment.58 Those who did not take up this option or had larger pension pots would be transferred into a new scheme. The new scheme would provide benefits above PPF levels but substantially below entitlements accrued. Taveta was proposing to make a one-off contribution of approximately £54 million. As the schemes would shortly report a combined £225 million deficit, in simple terms, it was proposed that scheme members would therefore bear three-quarters of the cost of pensions restructuring.59

29.A period of discussion followed between the trustees, who appointed KPMG to advise them on the project, and Taveta, advised by Deloitte. There was ongoing disagreement about the “estimated outcome statement”, the prospective value to the schemes in the event of insolvency. Ascertaining this figure was necessary for the trustees to establish that Thor was preferable to insolvency for the schemes.60 Among other things, TPR needed this amount to be less than the one-off contribution being proposed by Taveta in order to approve Thor. The trustees expressed further concerns including:

many aspects of the proposal had not been “properly addressed or thought through”;61
the structure of the plan was untested and therefore was likely to attract considerable interest from TPR;62
the proposed timeline, by which Deloitte had hoped to deliver Thor by early 2015 having secured TPR clearance in Autumn 2014, was “over-optimistic”;63
they remained to be satisfied that the “burning platform” of inevitable BHS insolvency had been established, given the complexities of Taveta governance;64 and
though they were under pressure to complete due diligence quickly, they had not been provided with the necessary data: for example, they were told that cash flow data distinguishing BHS from Arcadia were not available because transactions were operated through a single group account.65

Chris Martin asserted that the trustees would not be “bumped into agreeing” Thor.66

30.The trustees broadly concurred with the company, however, that a restructuring along the lines of Thor was desirable.67 The trustees sent TPR a summary of the proposal, known as the Thor “storybook”, on 3 July 2014.68 A draft clearance application was submitted to TPR by Taveta on 17 July 2014. This included a request for a Regulated Apportionment Arrangement (RAA), a rarely-used device which TPR would need to approve for Thor to be implemented.69 The proposal submitted lacked key financial data, including the estimated outcome statement.70 This figure, and the assumptions behind it, remained a matter of dispute between Deloitte and KPMG. On 22 August 2014, Chris Martin estimated that their respective estimates of the Taveta contribution necessary were £40 million apart.71

31.TPR has various regulatory powers intended to ensure that sponsoring employers cannot avoid their responsibilities to pension schemes. These are known as “moral hazard” provisions.72 From their initial receipt of the storybook, TPR expressed concerns about moral hazard with respect to the BHS schemes.73 On 22 August 2014, TPR asked the trustees to establish whether a better settlement for the schemes than Thor might be achieved through the use of moral hazard powers.74 TPR discussed this requirement with Taveta on 28 August.75 TPR subsequently wrote to Chris Martin on 4 September setting out the information the trustees needed to request. This included data on dividends, intra-group payments including rents and management charges and the use of BHS as collateral for business purchases or debt,76 back to the acquisition of BHS in 2000.77

32.In a conference call the next day Paul Budge and Neville Kahn, of Deloitte, informed the trustees that Sir Philip wished to “pause” Project Thor pending a review of all options in January 2015. Though the role of TPR was discussed, including Sir Philip’s concern that it was “taking an overly keen interest in Thor”, the reasons cited for the pause recorded in the trustees’ notes were:

“economic uncertainty, given the Scottish independence vote”;
“political uncertainty/global tensions”, referencing Russia, Ukraine and the Far East; and
“Christmas/peak trading period — to allow BHS’s new management the chance to prove themselves”.78

In a subsequent private discussion, Chris Martin noted that Sir Philip and his company’s position had “changed since yesterday”.79 He subsequently told us that the pause was “very, very disappointing” given Thor promised to provide better benefits to pensioners than the PPF.80

33.In the aftermath of Sir Philip’s decision not to proceed with Project Thor, the trustees and TPR were aware both that BHS could not adequately meet its pension responsibilities alone and that Taveta did not intend to continue supporting it.81 The trustees noted that “TPR will be very concerned because the main Scheme is so significantly under-funded and therefore a risk to the PPF”.82 As the deficit would continue to grow, the failure to agree a restructure would leave the PPF liable for greater compensation in the event of insolvency.83 The trustees quite properly acted quickly, de-risking the schemes’ assets and preparing for a possible un-pausing of Thor in early 2015 through, for example, continuing to seek agreement on the estimated outcome statement.84 Though Sir Philip’s stated position was that all options remained open for BHS and its pension scheme, Paul Budge and Neville Kahn acknowledged that a “business as usual” outcome was no longer credible: some form of resolution was needed for the schemes to be sustainable.85 The trustees continued to press for the moral hazard information that was a pre-requisite of TPR signing off any subsequent proposal.86 Sir Philip continued to refuse to provide it.87

34.The pension deficit had long been a substantial barrier to the sale of BHS. Project Thor was a credible approach to making the company’s pension liabilities more manageable. With a resolution of pension liabilities a sale of BHS to an appropriate purchaser would have been more possible. Thor would have resulted in reductions to pension entitlements, but these cuts would have been smaller than BHS pensioners now face in the PPF.

35.The Arcadia board cited a variety of explanations for pausing Project Thor, ranging from Christmas to the Scottish independence referendum and instability in Ukraine. We do not accept them. The primary reason was Sir Philip Green’s resistance to TPR’s moral hazard requests. He did not wish to respond to requests for information regarding historic dividends, management charges, sale and leaseback arrangements, inter-company loans and the use of BHS shares or assets as collateral for company purchases. At best this demonstrated a lack of willingness to act to secure the pension funds’ future.

Pension schemes and the sale

36.The proposed sale of BHS to RAL (known at that time as “Swiss Rock”), came as a surprise to both the trustees and TPR.88 At a meeting with Paul Budge and Neville Kahn on 2 February 2015, Chris Martin was told that the decision to sell was primarily a result of Sir Philip Green having decided that Project Thor had become too expensive.89

37.At that same meeting, Chris Martin was told that RAL was the preferred purchaser, that Goldman Sachs was leading the corporate finance process and that RAL had deposited £35 million in a bank account as a statement of means.90 Only the first of these was correct.91 Surprised that a bidder was willing to take on the pension schemes in full,92 Chris Martin sought assurances that the proposed purchaser could meet their obligations. Sir Philip told him that RAL were providing £120 million of working capital as a requirement of their offer.93 That also did not prove to be the case.94 Annual pension contributions of £10 million, as agreed in the 23 year recovery plan, would be provided for three years, split equally between Taveta and RAL. There was no commitment after three years.95

38.The trustees were also told they would be given a security package, which they understood to be “mitigation for detriment to the sponsoring employer’s covenant”, though it was not clear what was expected in return. Originally, and in addition to the three years of pension contributions, the scheme was to receive floating charge over the BHS stock capped at £20 million and was to be assigned £80 million of Arcadia’s intercompany loan balance to BHS. Following the sale, on 23 March 2015, the trustees were told that their total support package would be a £40m fixed and floating security plus £15m of contribution support.96 That reduced security ultimately proved illusory. It was withdrawn by Sir Philip Green in a phone call with Chris Martin on 7 October 2015 having never formally been put in place. Sir Philip said he would hold back assignment until discussions with TPR had been resolved.97

39.Chris Martin first met Dominic Chappell and RAL on 19 February 2015. He was accompanied by Tony Clare, Taveta’s adviser from Deloitte. RAL explained that they would only proceed with the purchase if they understood a Thor-like solution to the pension scheme could proceed.98 Mr Martin was surprised, however, that due diligence regarding the pension schemes “had not been the focal point anticipated”;99 indeed, at that point no pensions papers had been disclosed to Grant Thornton, who were conducting financial due diligence on behalf of RAL.100 Grant Thornton contrasted Arcadia’s “very responsive” approach to information requests on non-pension issues, to the limited provision of information on the state of the pension scheme.101 In an email five days before the sale, Keith Hinds of Grant Thornton recounted Tony Clare stating that Sir Philip had refused to grant Grant Thornton access to TPR or Chris Martin.102 The same email illustrates various other misconceptions about Project Thor, including that that the trustees and Sir Philip had “broadly agreed” that a £50 million contribution would ensure that a Thor-like arrangement would be of no material detriment to the schemes.103 Paul Budge had opted not to “enlighten” Dominic Chappell about the far higher updated cost of a potential restructuring in an earlier exchange.104 Neither RAL nor their representatives met TPR, nor had any further meetings with the trustees. The RAL minutes for the board meeting that approved the purchase of BHS note that a direct approach to the trustees without the seller’s permission risked “de-railing the deal”.105 Sir Philip chastised Chris Martin the following day for jeopardising the sale by demanding guarantees of security and informing the purchaser that pension contributions might need to increase to £30 million per year.106

40.Based on the limited high-level information to which they had access, Grant Thornton were able to report to RAL that the pension schemes’ size and deteriorating funding position presented “a real threat to the viability of the business” unless a Project Thor-style settlement could be achieved. They also warned of the possibility that such a deal could be rejected by the trustees, TPR or PPF.107

41.Olswang, RAL’s legal advisers, also had only limited pensions information. In their due diligence report, prepared for RAL, they noted that the schemes were “anywhere between £250 million and £500 million in deficit”, which was “far too large for a group that is this size that is loss making” and therefore the schemes needed to be “restructured post Completion”.108 Stating that they, too, “had not been permitted access” to the trustees or TPR, Olswang highlighted the “inherent risk that the trustees or the regulator may engineer a situation post-Completion which is adverse to the Buyer and the Group’s prospects”.109 RAL were aware that implementing Project Thor would be “expensive and time-consuming”.110 It is not clear that they understood how reliant any pensions resolution would be on Sir Philip’s willingness and ability to negotiate with TPR an appropriate contribution. Olswang were told, by Taveta or their advisers, that TPR had “raised no particular concerns” regarding the draft clearance application. That was simply not true. There was, the Olswang report noted, “no supporting evidence, beyond the seller’s word” that Thor had been acceptable to TPR and the trustees.111

42.Taveta had barely more contact with TPR than RAL in the run-up to the sale. Paul Budge told Chris Martin on 2 February 2015 that Sir Philip was unlikely to agree to any moral hazard work unless he was compelled to do so. Mr Martin warned that TPR’s interest in the schemes would be “heightened by an acquisition”.112 On 3 March, TPR wrote to Arcadia expressing concerns about the sale, including that trustees were awaiting critical information, and requested an urgent meeting.113 At this meeting, which took place the following day, Sir Philip Green set out a proposed settlement for the pension schemes in the event of a sale and a possible subsequent Thor-style restructuring of the schemes. The options open should the sale not proceed were also discussed.114 No formal applications were submitted and it was not clear what he was expecting of TPR. It was also not clear to TPR that the purchaser was aware of Sir Philip’s proposals.115 In a subsequent letter to Sir Philip on 5 March, TPR explained that the meeting would be the beginning of a “more intense” period of engagement between TPR and his company.116

43.In the event, that letter concluded the engagement between TPR and Taveta in advance of the sale. While Thor required the approval of TPR, a sale did not and it proceeded on 11 March. The sale and purchase agreement included a commitment for RAL to use “reasonable endeavours” to agree and implement a compromise on the pension scheme “as soon as reasonably practicable” following completion.117 We were repeatedly told by Taveta that BHS was sold to RAL as a “going concern”.118 Yet any Thor-style agreement would have been dependent on TPR acknowledging the inevitability of insolvency.119 TPR launched an anti-avoidance investigation immediately following the sale. On 25 March 2015 it issued its first demands for documents under Section 72 of the Pensions Act 2004.120

44.Project Thor required sign-off from TPR. The sale of BHS to RAL, and subsequent switching of direct sponsor responsibility for the pension schemes, did not. The sale was materially detrimental to the pension schemes. It came dressed with an informal assurance of a security which proved to be illusory as BHS collapsed. Arcadia also held the simultaneous positions that BHS was both a solvent business and in urgent need of a pensions restructuring that had inevitable insolvency as a prerequisite. That TPR decided to launch an anti-avoidance investigation and demand documents immediately following the sale should not have come as a surprise to anyone involved.

45.Dominic Chappell and RAL were aware that the pension schemes were in heavy deficit when they bought BHS. They were not, however, fully aware of the prospects for the pension compromise on which their plans were reliant. Sir Philip Green acted to conceal the true state of the BHS pension problem from RAL and its advisers. He also encouraged RAL to believe that resolution of the schemes’ problems through restructuring was more imminent and more achievable than was the case.

The Pensions Regulator and resolution

46.Taveta sought to attribute the absence of resolution of the BHS pension scheme to a failure of regulation. Sir Philip told us that TPR “hasn’t run towards us to try and help find a solution, for whatever reason”.121 Both Paul Budge and Chris Harris, Arcadia’s Property Director, told us that “we would not be here” if TPR had been set up in a different way.122 Michael Hitchcock, former BHS finance consultant, told us that TPR’s unwillingness to approve Project Vera, which was RAL’s version of Project Thor, suggested that the regulatory process was “not fit for the current commercial world”.123 We briefly consider Project Vera in Chapter 6.

47.We saw some evidence of TPR moving slowly with regards to BHS. Most glaringly, having received a 23 year deficit recovery plan in September 2013, already two months after the statutory deadline, it took until January 2014 for TPR to send their first information requests to the trustees.124 Thor might have had more chance of progressing were TPR able to participate fully in a more iterative negotiation process. It is also clear that their predominant lines of contact and information gathering, via the trustees, the trustees’ advisers and then Taveta’s advisers, put considerable distance between TPR and both Taveta and the individual on whom any deal would hinge.125 We have not sought to judge the regulatory framework on the basis of this one unusual case. We note, however, TPR’s evidence that pensioners may be better protected by a more proactive supervisory approach and stronger requirements for sponsors to cooperate with, and provide information to, trustees and TPR.126 We also note that the recent restructuring of the Halcrow pension scheme, a Thor-like arrangement which included TPR granting approval for an RAA, demonstrates that complex proposals can be authorised.127

48.The BHS pension scheme awaits resolution. Sir Philip pledged to us that “We will sort it. We will find a solution”.128 Sir Philip has made assurances of his intention to resolve the pension scheme for many years. In 2005 and 2006 his company discussed with Paternoster, an insurance company, the possibility of the scheme being bought out.129 A similar option was considered in 2008, but was considered too expensive.130 In 2012 he reassured the scheme trustees of his ongoing commitment to honouring his duties to the scheme members.131 He gave the same assurances to the Pensions Minister.132 In the minutes of the board meeting approving the purchase of BHS in 2015, RAL noted Sir Philip’s “oft-repeated representations” that he would “participate in any pension deficit solution […] including making a substantial contribution”.133 Since the sale, Sir Philip has continued to seek a pension settlement.134 This was, he explained, always the understanding.135 He has also continued to express frustration with TPR, saying they were “trawling through bullshit from 10 years ago” and that he wanted to “stop being tortured” by them.136 TPR is, however, yet to receive a single detailed proposal for resolution or an adequate offer to the schemes.137

49.The Pensions Regulator (TPR) is reactive and can be slow-moving. Its first response to the 23 year recovery plan came in January 2014, four months after it was submitted and six months after it was due. TPR could also, at times, have shown more urgency in engaging with BHS and the pension scheme trustees regarding the various incarnations of Thor. TPR will increasingly be called upon to make decisions crucial for thousands of employees and pensioners in a fast-moving and uncertain environment. It is essential that it has the powers, resources, leadership and commercial acumen to act decisively.

50.Sir Philip Green and Paul Budge both sought to shift blame for their ongoing failure to resolve the pension fund to TPR. It is true that their mode of operation contrasts with that of TPR. But TPR, which has a primary purpose of defending the rights of current and future pensioners, is not placed to barter or accept informal assurances. Plans without numbers were quite reasonably deemed insufficient. The fact remains that Sir Philip could have “sorted” the pension scheme at any stage, not through force of personality but by providing TPR with the information they required or making a sufficiently large financial contribution. The onus was, and remains, on him.

51.Dominic Chappell and the directors of RAL should not be absolved of blame for the plight of the BHS pension scheme. They accepted responsibility for it with a negligent and cavalier disregard for the risks and potential consequences. This negligence continued into their incompetent and self-serving ownership of the company. Should Sir Philip come to a settlement with TPR, RAL directors should not escape regulatory investigation.

27 TPR Trustee guidance, issued December 2007

28 TPR Code of practice no. 3 “Funding defined benefits”, para 45

29 Pensions Act 2004 s5

30 As above

31 Members who have already reached the PPF’s definition of normal pension age receive 100 per cent of scheme benefits, subject to lower levels of indexation than is typical in schemes. Members who have not yet reached that age receive 90 per cent of scheme benefits, subject to a cap. Those reduced payments are also subject to lower indexation.

32 Eligibility terms are set out on the PPF website.

33 In practice, this meant that the schemes would have gone in to the PPF and pension payments made at PPF levels, unless the schemes could give assurance that they could be sustainable in paying above PPF levels of benefits. The act of entering into the CVA made it harder to secure a resolution on the pension schemes.

34 Q 38

35 BHS pension trustee minutes, 11 June 2002, 24 November 2006, 13 February 2007, 8 May 2009, 26 August 2009

36 Letter from Dr Margaret Downes to Paul Coackley, 29 August 2005

37 Letter from Paul Coackley to Dr Margaret Downes, 11 January 2006

38 BHS pension trustee minutes, 20 November 2007, 25 November 2008

39 Letter from Alan Rubenstein, 11 May 2016

40 Letter from Rt Hon Steve Webb, 13 June 2016; BHS pension trustee minutes, 31 October 2012

41 BHS pension trustee minutes, 8 May 2009. The minutes record “Paul Coackley remains adamant that the Company’s pension budget cannot exceed £6.5 million per year”.

42 Letter from TPR, 20 May 2016

43 TPR, Scheme funding statistics May 2014. The BHS Pension Schemes’ 31 March 2012 funding valuation can be compared with that of other schemes that had valuations at the same time. TPR reported on “tranche 7” DB schemes in May 2014. Tranche 7 comprises schemes with effective valuation dates falling from 22 September 2011 to 21 September 2012, so the 31 March 2012 BHS valuation falls neatly in the middle of this. Measured by assets as a percentage of technical provisions, BHS was significantly more weakly funded than the median in 2012 (62 per cent compared with 81 per cent) and its position worsened slightly from 2009 (65 per cent to 62 per cent), whilst Tranche 7 schemes typically improved. In 2009 BHS was just above the lower quartile of schemes whereas by 2012 it was just above the bottom 5 per cent.

44 Q 1880

45 BHS pension trustee minutes, 31 October 2012 and 21 May 2013; Q 742. The 31 October 2012 minutes state that because of “the private company status of BHS Limited […] these payments are effectively being met by Sir Philip and the Green family”.

46 Q 746

47 TPR, Scheme funding statistics May 2014. TPR analysis of “tranche 7” valuations (conducted between 22 September 2011 and 21 September 2012), shows that the median recovery plan length was 7.8 years and the 95th percentile was 17.1 years.

48 BHS pension trustee minutes, 19 May 2015

49 Qs 1854–6

50 Q 1895, Qs 1869–70

51 See, for example BHS pension trustee minutes, 11 June 2002, 10 September 2002, 30 October 2002, 21 May 2003, 22 May 2003, 21 November 2003, 8 June 2006, 8 April 2008

52 See, for example (up to 2012 valuation), BHS pension trustee minutes, 27 September 2000, 20 March 2002, 11 June 2002, 26 February 2003, 21 May 2003, 16 June 2005, 22 November 2005, 8 December 2005, 15 February 2006, 15 May 2006, 8 June 2006, 24 November 2006, 14 August 2007, 20 November 2007, 25 November 2008, 2 March 2009, 8 May 2009, 19 May 2009, 12 June 2009, 23 June 2009, 26 August 2009, 24 November 2009, 1 February 2010, 16 February 2010, 20 May 2010, 29 June 2010, 12 October 2010, 30 November 2010, 13 December 2011, 14 March 2012

53 Evidence from Rothesay Life (PPF00187)

54 See, for example, TIL board minutes 24 September 2009, 28 January 2010, 18 February 2010, 23 March 2010.

55 Letter from Deloitte, 6 June 2016

56 Project Thor presentation, Deloitte, 29 January 2014

57 BHS pension trustee minutes, 6 February 2014

58 As above

59 BHS pension trustee minutes, 6 February 2014, 24 June 2014

60 For example, BHS pension trustee minutes, 24 June 2014

61 BHS pension trustee minutes, 22 April 2014

62 BHS pension trustee minutes, 6 March 2014

63 BHS pension trustee minutes, 6 March 2014 and note of meeting between Taveta, trustees and respective representatives, 7 May 2014

64 BHS pension trustee minutes, 22 April 2014

65 BHS pension trustee minutes, 22 April 2014

66 Notes of conference call between trustees and advisers, 20 May 2014

67 Q 227–8 (David Clarke and Tony Clare) and Project Thor, Proposed pensions solution: Clearance Application to TPR, sent to TPR on 3 July 2014

68 Project Thor, Proposed pensions solution: Clearance Application to TPR, sent to TPR on 3 July 2014

69 The original Thor proposals presented to the trustees included voluntarily seeking clearance from TPR. It was envisaged that members would be moved into the new scheme in bulk without providing consent. This proposal, about which the trustees had expressed reservations (see minutes of the 6 February and 6 March 2014 meetings of the trustees) had been dropped by the 7 May 2014 meeting between Taveta and the trustees. It was not clear how the Scheme Actuary would give the required certificate that the benefits were “broadly no less favourable”. As some members would inevitably not have provided consent to either a lump sum or joining the new scheme, a residual scheme would result. It was intended that the residual scheme would enter the PPF. This would require RAA approval from TPR and the PPF. TPR stressed that RAAs are “extremely uncommon” and intended by Parliament to be used rarely. See Letter from TPR, 20 May 2016.

70 Draft Clearance Application by Taveta to TPR, 17 July 2014

71 Notes of conference call between Chris Martin and TPR, 22 August 2014. Deloitte suggested an estimated outcome statement of £50 million while KPMG believed it was “more like £90 million”.

72 Pensions Act 2004 s38–51

73 Note of call between trustees and TPR, 7 July 2014

74 Notes of call between Chris Martin and TPR, 22 August 2014

75 Email from Eversheds to Chris Martin, 29 August 2014

76 In its call with trustees on 22 August 2014 TPR said that it was interested in the Green family’s acquisition of Arcadia being “supported” by their ownership of BHS.

77 Letter from TPR to Chris Martin, 4 September 2014

78 Notes of conference call between Taveta, the trustees and their respective advisers, 5 September 2014. See also correspondence between Deloitte and TPR regarding the pause.

79 Notes of call between trustees and their advisers, 5 September 2014

80 Q 665

81 The notes of a call between trustees and their advisers on 5 September 2014, the day Thor was paused, state “The ‘genie’ is well and truly out of the bottle”.

82 Notes of call between trustees and their advisers, 5 September 2014

83 As above

84 Email from Chris Martin to Paul Budge and Neville Kahn, 15 September 2014

85 Chris Martin’s notes of meeting with Paul Budge and Neville Kahn, 24 September 2014

86 See, in particular, the detailed request for moral hazard information sent from KPMG to Deloitte on 3 October 2014 and Chris Martin’s notes of meeting with Paul Budge and Neville Kahn, 8 December 2014 (in email on 13 December)

87 See Chris Martin’s notes of his meeting with Paul Budge and Neville Kahn on 8 December 2014. Sir Philip proposed that the signing off of accounts by PwC, his company’s auditor, would provide the necessary assurances.

88 See email from Chris Martin to TPR regarding press speculation of a sale, 26 January 2015

89 Chris Martin’s notes of meeting with Paul Budge and Neville Kahn, 2 February 2015

90 As above

91 ACE transferred £35 million to an Olswang escrow account two days later, on 4 February 2015. That transaction is considered in Chapter 4. The trustee minutes of 3 March 2015 further cites Tony Clare of Deloitte stating that Goldman Sachs were advising Taveta 2.

92 Chris Martin’s notes of meeting with Paul Budge and Neville Kahn, 2 February 2015

93 Chris Martin’s notes of meeting with Sir Philip Green and Tony Clare, 19 February 2015

94 See Chapter 4

95 This arrangement was set out in Schedule 8 of the BHS Sale and Purchase Agreement, 11 March 2015

96 Written submission from Chris Martin on pension security package

97 BHS pension trustee minutes, 15 October 2015

98 Chris Martin’s notes of meeting with Dominic Chappell, Eddie Parladorio, Lennart Henningson and Tony Clare, 19 February 2015

99 BHS pension trustee minutes, 3 March 2015

100 Chris Martin’s notes of meeting with Sir Philip Green and Tony Clare, 19 February 2015

101 Q 825–827; Letters from Grant Thornton, 23 June 2016 and 7 July 2016

102 Email from Keith Hinds to RAL and advisers, 6 March 2015

103 Email from Keith Hinds to RAL and advisers, 6 March 2015