The Pension Protection Fund aims to protect pensions - not management

[TrueBlueTerrier]

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It looks terrible for the Pension Protection Fund (PPF): the pensions lifeboat fund is planning to vote against a restructuring of the UK arm of Toys R Us, an action that could mean 3,200 people lose their jobs. On the company’s proposal, only 800 employees would depart and the others would resume the fight against Amazon’s invasion of the toy market.

The PPF, however, is not to blame for this mess. Its hands are tied. The PPF’s job is to look out for the interests of pensioners in Toys R Us’s defined benefit scheme and bargain accordingly. It has put forward a plan that looks more than reasonable: Toys R Us, as the price of support for its self-help plan, should put £9m into a pension fund that is showing a £30m deficit.

The company pleads it hasn’t got the money, a cry that raises many questions, most of them identified by Frank Field, the chairman of the work and pensions select committee. What on Earth was going on when the UK division of Toys R Us wrote off a £584m loan to the US parent, which has entered bankruptcy proceedings? And why was the UK managing director of Toys R Us being paid £1.3m last year?

For now, the PPF must contain itself to the immediate question of Toys R Us’s survival prospects in the UK. If the company – actually – can find £9m, it should cough up. If the cupboard really is bare, then the self-help plan may be doomed anyway and carrying on could make matters worse for the PPF. So-called company voluntary arrangements, of the sort Toys R Us is seeking, do not have a great record of success.

The best short-term solution is for Toys R Us’s management to turn somersaults to find the £9m. If it’s too late to ask the US bankruptcy courts to waive annual royalty payments of £8m-ish for a year, then look for a bridging loan or find other means. Managements cannot just assume that the PPF, when pushed, will agree to anything.

Whatever happens at Thursday’s CVA hearing, that huge loan write-off needs to be examined by the Pensions Regulator. There may be an innocent explanation but, on the face of it, it is extraordinary that the trustees of the pension fund and the regulator were kept in the dark. One lesson from the BHS pensions debacle was that the regulator needs more powers to intervene in substantial transactions. The government, which hasn’t got further than a white paper, needs to hurry up.

[k979aaa]

Herith the lesson don't pay shareholder dividends at the expense of your employees pension fund the law should be that they be hanged drawn and quartered it may make them think twice!