BHS 'could file for administration' threatening 11,000 jobs on Monday

Stevie_Palimo

vivatifosi wrote: »

I am really confused. Is it the EU's fault that BHS failed?

Nope it is down to a store selling tat much alike the abundance of pound stores but with an inflated price against the items sold, I think as previously said when stores fail to look at a customers needs and adapt to the changes they will only go one way.

antrobus

CLAPTON wrote: »

the gold standard is a form of currency union

No, it isn't really. In any case, Greece didn't join the gold standard until 1910, and thus obviously had no effect on their ability to default in 1826, 1843, 1860, or 1894. Whilst WW1 killed off the old classic gold standard, and its replacement was dead in 1931, and yet Greece still managed to go bust in 1932.

But if you want more examples of countries who have managed to run out of money without signing it up to a currency union you can have Argentina, or Zimbabwe, or indeed Germany.

antrobus

kabayiri wrote: »

As those ex-BHS employees will tell you, it's important to keen one eye on the future.....

Technically, speaking there aren't any "ex-BHS employees" at the moment. Or at least, no more than normal. BHS is still trading and Duff & Phelps haven't announced any redundancies.

The aforementioned Mike Ashley still wants to buy the darned thing and 'save' it.

Generali

The FT Alphaville blog on the BHS Pension Scheme:

http://ftalphaville.ft.com/2016/05/20/2162597/bhs-has-only-itself-to-blame-for-pension-troubles/#respond

.......it’s quite simple to manage a defined-benefit pension properly — especially if most of the beneficiaries are already retired. The level of interest rates only matters if you’re doing it wrong.

For most schemes, retirees are promised steady payments, in either real or nominal terms, until death. That’s essentially the same as if the plan sponsor issued long-term bonds, which means the easiest way to hedge pension liabilities is by buying the right sort of sovereign debt. The only challenge for the plan sponsor is figuring out how much money needs to be spent on which specific bonds to offset the obligations to beneficiaries. And even that’s pretty trivial, since actuaries can easily estimate how long your beneficiaries are expected to live.

antrobus

Generali wrote: »

The FT Alphaville blog on the BHS Pension Scheme:

http://ftalphaville.ft.com/2016/05/20/2162597/bhs-has-only-itself-to-blame-for-pension-troubles/#respond

I think the point would be that, whilst it is very easy to run a DB scheme, (you just buy the right kind of bonds), it is also very expensive, and thus DB schemes buy into equities and property and suchlike in the hope that they will outperform bonds and make it cheaper.

Generali

antrobus wrote: »

I think the point would be that, whilst it is very easy to run a DB scheme, (you just buy the right kind of bonds), it is also very expensive, and thus DB schemes buy into equities and property and suchlike in the hope that they will outperform bonds and make it cheaper.

...as covered in the blog, if the assets underperform the company stiffs the rest of us with the bill.

Nothing was learned in 2008.

vivatifosi

The blog talks about schemes where the majority of people have already retired. It is more problematic if you have a younger pension roll. They are also more expensive to buy out (the belt and braces option).

Also, it would be much easier to run a pension fund if the government played fair... and didn't routinely change the rules on a regular basis, as well as dipping their hands into your funds (yes I mean you Gordon Brown).

Another point that is missed is that for smaller funds (ok granted neither BofE nor BhS fit into this category) could not have access to the full range of tools until more recently, though we do now (eg LDI and diversified growth funds had too high a ceiling back at the time of the crisis).

None of this takes away from the fact that BhS totally screwed up its pension fund.

antrobus

vivatifosi wrote: »

...None of this takes away from the fact that BhS totally screwed up its pension fund.

As I understand it the BHS funds basically closed in 2009; no new entrants and no further accrual of benefits. So I don't really understand how the fund generated such a deficit in the following years. The liabilities must be fairly fixed, so someone must really have FU the assets BAR the assets, or otherwise bolloxed something or other.

vivatifosi

antrobus wrote: »

As I understand it the BHS funds basically closed in 2009; no new entrants and no further accrual of benefits. So I don't really understand how the fund generated such a deficit in the following years. The liabilities must be fairly fixed, so someone must really have FU the assets BAR the assets, or otherwise bolloxed something or other.

Am having a look at the scheme docs now. Confirm that the scheme was closed in August 2009. As at 2015, it had three categories of membership: active deferreds (ie those still employed by the company, but now paying into a different pension, probably DC, or no longer paying in) they totalled 851, other deferreds (generally those who have left but not yet at retirement age) totalling 12,837 and pensioners 6774.

The last pension statement says that the company had undergone a period of derisking, but still only had a funding level of 65% on an ongoing basis, 43% on a buyout basis.

The above is taken from this document:
https://www.bhspensions.com/wp-content/uploads/2015/09/BHS-Pension-News_2015.pdf

I haven't yet worked out how they got into this mess. For sure, companies look to return seeking assets rather than crystalising losses, nevertheless this is a huge shortfall. I can't believe that the trustees did not manage to get a shorter repayment plan, nor that this was being closely investigated by the PPF. Scary...

Off to see if I can find a bit more.

ETA:
Have had a look back at the scheme docs for as far as they go back on the web. They have been in this pants situation over several years and using return seeking assets to try to close the shortfall. The initial repayment plan was for 12 years. Rather than increasing the amount repaid to close the gap, they were allowed to lengthen the period over which they were to make up the shortfall.

antrobus

vivatifosi wrote: »

Am having a look at the scheme docs now. Confirm that the scheme was closed in August 2009. As at 2015, it had three categories of membership: active deferreds (ie those still employed by the company, but now paying into a different pension, probably DC, or no longer paying in) they totalled 851, other deferreds (generally those who have left but not yet at retirement age) totalling 12,837 and pensioners 6774.....

851 isn't a lot out of 11,000. Perhaps BHS has huge staff turnover.

vivatifosi wrote: »

...I haven't yet worked out how they got into this mess. ...

Well, the Bhs Pension Schemes were established on 1st July 2000, following Mr Green's purchase of BHS from Storehouse. It looks as if the assets transferred across were sufficient; the fund had a £5m surplus in 2001. The schemes were subsequently closed to new members in July 2005, before future accruals ceased in 2009.

Thus I am similarly confused as to how they managed to generate a big deficit.