Mothercare looks to protect its UK pension schemes

Mothercare is looking to move its UK pension schemes across to its international business in order to help preserve benefits for scheme members.

The company is examining a deal that would stop the funds being placed in the UK Pension Protection Fund (PPF).

If the pension schemes enter the industry-funded lifeboat it would mean cuts to future retirement benefits.

It comes as the troubled retailer is set to formally appoint administrators to its UK business.

The administration move would put 2,500 jobs at risk. Mothercare has said its 79 UK stores are "not capable" of achieving a sufficient level of profitability, and that so far it has failed to find a buyer.

• What has gone wrong at Mothercare?

• Mothercare administration threatens 2,500 UK jobs

• Why the UK's shops are closing down

The firm has two employee pension schemes, which between them have nearly 6,000 members. It is now looking at moving these out of the UK subsidiary.

At its most recent actuarial valuation two years ago, Mothercare's pension schemes were £140m in the red.

That means if the UK arm goes bust then the PPF would be forced to step in - triggering major cutbacks for pension members.

Mothercare has already gone through one rescue deal, in May 2018, known as a company voluntary arrangement (CVA).

A CVA is an insolvency process that allows a business to reach an agreement with its creditors to pay off all or part of its debts. The process enabled the chain to shut 55 shops.

As part of that move - while it was waiting for approval of that CVA - the two pension schemes temporarily entered the PPF, but exited after a couple of months.

'We are hoping for the best'

Bridget Lock is from Buckinghamshire and in her late 20s. She has worked at Mothercare for almost two years but doesn't know what is going to happen to her job.

"We're hoping for the best," she says. "We'll just have to wait and see."

Ms Lock says she "loves" her job. "I joined as a Christmas temp. I think lots of people do that, then end up staying."

She says: "We've had a loyal customer base. Recently we've seen less customers but we've been really fortunate with our loyal customers.

"We've had a lot of people give us positive feedback [but] we all know that our future is not guaranteed."

'Good outcome'

The UK's Pensions Regulator is understood to have been kept informed about the latest developments.

Dan Mindel, managing director at Lincoln Pensions. a covenant advisory business, said: "Transferring its two employee pension schemes from the UK subsidiary to the group parent company, would certainly be a good outcome for the scheme, especially since the group owns the profitable overseas part of the business.

"The pensions industry in general will also be pleased to see members of a retail sector scheme achieve a better outcome than the PPF."

Mothercare's move towards administration comes as High Street retailers continue to face tough times amid a squeeze on consumers' income, the growth of online shopping and the rising costs of staff, rents and business rates.