Background

The announcement in February 2023 that the 8,800 members of the Arcadia pension schemes have had their benefits protected by a deal with Aviva, following Arcadia's insolvency in November 2022, has prompted the UK's Pensions Regulator to publish a blog urging pension trustees to engage with the Regulator promptly if their sponsoring employer is in difficulty or already involved in discussions about a restructuring/insolvency process.

What's important here?

• Taylor Wessing advised the owner of the Arcadia Group in ground-breaking negotiations leading to an arrangement which led to a restructuring in June 2019 and protected the pension schemes if the companies eventually failed, which they did in November 2020.

• The Regulator calls the Arcadia outcome "a strong reminder of what can be achieved when the trustees, whose sponsoring employer is struggling, engage with the Regulator, the Pension Protection Fund and other key stakeholders at an early stage".

• It's true that, in a complex situation like Arcadia, without early engagement the position of creditors generally and the pension scheme in particular can be at a heightened risk.

• However, it is also crucial that the parties engage constructively. The Arcadia arrangements show what can be achieved when that happens.

Key takeaways

The Regulator has published guidance for pension scheme trustees on how to get the best outcome for pension schemes where the employer company is in distress. Investors should be ready for UK pension scheme trustees to be more proactive than before to protect the interests of their schemes. The Regulator is encouraging this and also that all parties get professional advice early - our experience is that the best outcomes are most likely when the professionals have experience of these situations.

Find out more 

To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.