Pension funds have been badly run in the UK, but in Britain a protection fund exists. No such system exists here, says Kyran FitzGerald.
IN BRITAIN a wealthy retail boss enjoys the good life while former employees head for the scrap heap with uncertainty over their living standard in retirement.
In Ireland, a report calls for greater protections for workers faced with redundancy while pressure grows for the establishment of an industry-wide Pension Protection Fund.
s we celebrate the May Day bank holiday weekend, spare a thought for the 11,000 employees of British Home Stores and for the group’s 20,000 pensioners who are facing into an uncertain future courtesy of some dubious business practices.
News that BHS, an 80-year old household name has gone into administration will have seen shudders across the retail world. This represents the biggest store collapse since Woolworths disappeared in 2009.
BHS once maintained a large presence on Dublin’s O’Connell Street before pulling out amid security concerns at the height of the Troubles. Last week’s shock BHS announcement was followed by news that another venerable UK clothing store, Austin Reed had also collapsed into administration.
Austin Reed once maintained a high profile presence on Grafton street.
The former owner of BHS, Sir Philip Green, a famously brash entrepreneur best known for his lavish lifestyle, and close business association with the model Kate Moss, is coming under sustained criticism after it emerged that companies controlled by the Green family took around £425m (€542m) out of BHS between 2002 and 2004.
There is even talk that Sir Philip should be stripped of his knighthood — thereby enduring the same fate as the disgraced banker Fred Goodwin — unless he were to pony up a couple of hundred million towards the BHS Group’s depleted pension fund.
Mr Green is not the only High Street king to face questions over how he has run his empire.
Newcastle United owner Mike Ashley, who also owns the huge Sports Direct empire, has attracted more than his share of controversy, not least among fans of the football club.
Ironically, Mr Ashley has emerged as a possible buyer for BHS, though it is most likely that he would cherry pick the best locations as part of an asset-driven acquisition.
Whatever happens to the carcass of BHS, and to its worried staff, its former owner could face challenging times.
It would seem he has plenty of questions to answer.
According to the Financial Times, capital spending on BHS stores between 2001 and 2014 amounted to £350m, yet close to £450m was provided in the accounts for depreciation, suggesting that not enough was being reinvested in the business.
Much criticism has centered on the manner in which the BHS pension fund has been run, with deficits accumulating.
While no one is suggesting that Mr Green has engaged in the sort of financial rape and pillage that the late Robert Maxwell embarked on at the Mirror Group in the 1980s, his reputation has been taking something of a battering.
The BHS saga has called attention to an issue that extends well beyond BHS: The state of company pension funds.
In all too many cases, owners failed to repair the roof when the sun was shining in the investment world. Instead, they embarked on lucrative ‘pension holidays’, failing to invest and relying on stock market appreciation.
The results have been all too predictable. Deficits have grown while accounting standards have become more strict.
A case in point: Attempts to save the steel industry in South Wales has been complicated by a reluctance on the part of would-be investors to get saddled with accumulated pension fund debts.
The Green family is believed to have accumulated a fortune worth over £3.5bn. The fortune is controlled mainly through companies in tax havens.
Sir Philip, a stocky individual, who favours multi-coloured swimming trunks, spends much of his time on one of his large yachts, frequently commuting between London and the Mediterranean.
Green sold BHS on last year for £1 to a consortium fronted by Philip Chappell, a man with little or no experience of retailing, butexperience of bankruptcy.
Green and his wife are known for their lavish lifestyle funded in large part by clever tax planning.
The colourful knight has used the services of some of Britain’s top lawyers in order to stay within the law while extracting the maximum from his investments.
However, Britain’s pensions regulator, Lesley Titcomb, is viewed as a tough operator who will examine closely how the BHS pension fund, which has a deficit running into hundreds of millions of pounds, has been run.
The BHS pension fund is itself the major creditor of the group. The beneficiaries, at least, can have resort to the UK Pension Protection Fund which had a surplus of £3.6bn at the end of its latest year.
It is funded by an industry-wide levy. No such equivalent exists in Ireland.
It is three years since the European Court of Justice ruled in favour of Waterford Crystal pensioners, finding that the Irish State was obliged to protect the pension entitlement of employees in the event of the insolvency of their employer.
The workers have received their payouts.
Elsewhere, the picture remains muddy, with few signs yet that we are about to emulate the British in setting up a national protection fund.
This task will be one facing former ICTU General Secretary David Begg, the chair of the Pensions Authority. Almost one year on from the shock closure of the Clerys department store, there have, at least, been some developments.
In February, the Workplace Relations Commission (WRC) awarded around €120,000 to 61 former Clerys’ workers.
According to a report in Industrial Relations News, lawyers for the former owner OCS argued that the provisional liquidator of Clerys did not have the power to consult with employees before dismissing them.
However, the Adjudication Officer of the WRC cited a recent decision of the European Court of Justice which states that until the company’s legal personality has been dissolved there is an obligation to consult with employees ahead of a collective redundancy.
Meanwhile, the chair of the Labour Court Kevin Duffy and barrister Nessa Cahill have just completed a report into issues of employee protection raised by the Clerys affair.
They have proposed that the law be altered so as to leave employers under an obligation to consult with staff 30 days ahead of planned mass redundancies.
At the time, Employment Minister Jed Nash described the overnight closure of one of Dublin’s best-known store as “predatory capitalism at its worst.”
Reform may be coming — inch by inch, and not before time.
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