Rescue gets go ahead from the Pension Protection Fund
When McColl’s went into administration on 9 May 2022, the joint administrators from PwC completed a sale of the business and assets of McColl’s to Morrisons Group, McColl’s largest supplier. The deal successfully transfered all 16,000 staff and over 1,100 stores across the UK and included Morrisons agreeing to support McColl’s two pension schemes going forward.
The rescue of two McColl’s pension schemes has now been confirmed by the Pension Protection Fund (PPF). The rescue was carried out by the trustees, Morrisons, the administrators and their respective advisors.
The schemes, which have combined assets of £130m, will no longer be in the PPF assessment period and will be supported by Morrisons Group from 14 July onwards. The deal has secured the 2,000 members greater pension benefits than what would have been possible had the rescue not been agreed.
As the pension schemes have now been rescued, and members' benefits secured, they do not need to have a claim on the insolvency estate of McColl’s, meaning the other creditors of McColl’s are also likely to receive a higher distribution than they otherwise would have.
Minesh Rana, pensions director at PwC UK, comments:
“At the time of the McColl’s administration, the deal negotiated by the administrators and Morrisons helped to ensure that the trading business survived, jobs were preserved and a foundation was set for the rescue of the pension schemes of McColl’s employees.
“Scheme rescues like this are incredibly rare; over the last two months the stakeholders and their advisors have worked collaboratively to agree how a rescue could be achieved and implemented.
“The McColl’s pension schemes were relatively well funded, providing a strong platform for the rescues. As a result, the 2,000 pension scheme members will benefit from better pension benefits compared with if the scheme rescues had not taken place.
“With current economic forecasts showing lower growth and costs rising, it’s possible more businesses will go into distress over the coming months. Historically in restructuring situations, the pension schemes of distressed companies often have significant deficits and this can result in the pension schemes ending up in the Pension Protection Fund.
“However, the recent improvement in gilt yields as well as cash contributions paid over many years has resulted in many pension schemes now showing smaller deficits or even a surplus. Therefore, companies in distress with well funded pension schemes could become more common, providing stakeholders with a greater range of options and solutions in relation to pension schemes in distress situations.
“Healthy collaboration, open communication channels and an engaged trustee board during times of distress can make a real difference in how deals are made.”
Notes to the editor
Morrisons' Group company APHL will become the new sponsoring employer of the TM Group Pension Scheme and the TM Pension Plan, previously sponsored by McColl's Retail Group plc, from 14 July, 2022.
At PwC, our purpose is to build trust in society and solve important problems. We’re a network of firms in 156 countries with over 295,000 people who are committed to delivering quality in assurance, advisory and tax services. Find out more and tell us what matters to you by visiting us at PwC.
PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see how we are structured for further details.
© 2022 PwC. All rights reserved.