Merry Christmas from Toys R Us

DiggerUK

Company pensions scandal has new potential to stiff workforce. This time with an ‘Offshore Financial Centre” thrown into the story.

”Field has raised concerns about Toys R Us in the UK writing off £584.5m in loans owed by a Toys R Us firm based in the British Virgin Islands.”
https://www.theguardian.com/business/2017/dec/19/uk-pensions-lifeboat-blocks-toys-r-us-survival-plan

Toys R Us adds a seasonal twist to the lack of protection workers in company schemes face. What gobsmacks me, is that the UK arm wrote off over £580 million in debts to its US parent company.
This has happened despite Toys R Us uk needing £30 million to plug a total shortfall, and meet a demand off the Pension Protection Fund for an immediate £9 million.

The maximum that the PPF will cover is 90% of shortfall. So if you have a company pension, check it out, you may get a nasty surprise otherwise. Successive governments don’t seem too interested..._

jerrysimon

Grim as you say terrible news. I have no idea what it must feel like to find out your pension is reduced through no fault of your own after years of working.

I really dont understand (well I do) how the government bails out certain institutions for huge sums and does not take care/overlooks more vulnerable people's pensions.

JoeCrystal

DiggerUK wrote: »

The maximum that the PPF will cover is 90% of shortfall. So if you have a company pension, check it out, you may get a nasty surprise otherwise. Successive governments don’t seem too interested..._

To be fair, at least there is PPF in place to ensure that there are safety net. Can't really say about that with the DC pension funds which one have to rely on for retirement.

jerrysimon wrote: »

I really dont understand (well I do) how the government bails out certain institutions for huge sums and does not take care/overlooks more vulnerable people's pensions.

They did. It is called Pension Protection Fund funded by whatever schemes it takes over along with a levy from all other DB pension schemes.

redux

jerrysimon wrote: »

I really dont understand (well I do) how the government bails out certain institutions for huge sums and does not take care/overlooks more vulnerable people's pensions.

It sounds like that is exactly the dilemma for part of this story.

The protection fund is there, but how good would it be if too many schemes are run too irresponsibly and don't pay their subscriptions?

It seems to be saying it can underwrite some of this, but the firm needs to show some commitment by putting in its share too. That might be a simplistic reading by me though, as I haven't read a lot about it.

If there was a trade body in some other field, it can hardly be forced to act on behalf of non members.

woolly_wombat

Ros Altmann was interviewed about this on the Radio 4 Today programme this morning (around 1hrs 18mins in):
http://www.bbc.co.uk/programmes/b09jbsch

She made the following points:

• Pleased to see PPF is trying to ensure that the company can't just jettison the pension scheme into the PPF without any comeback
• Would not want other companies to think the PPF is an 'easy touch'
• Possibility that private equity owners could shut some stores and find a way of extracting further value, before putting the company into administration further down the line. This would leave less money in the pension fund.
• Writeoff of £585m loan last year should have triggered information being sent to pension regulator and pension trustees but that didn't happen
• There have been huge pay rises for senior executives of the firm even though it has been consistently making losses for some time

marlot

The £580m writeoff does seem very strange when there is a deficit in the pension fund. I'd want the management team to answer some serious questions - preferably under caution.

When I hear that the pay of the chief executive was boosted from £356,000 to £1m in 2015 and a further £1.3m in 2016. then it starts to look very fishy.

I think the PPF is playing this correctly. If the business is in severe problems at the best time of year, there seems a real danger that you waive the £9m now - and end up with a much bigger problem later.

le_loup

It's what some companies do:

Pay large amount to parent company
Take on a loan from another subsidiary in tax haven
Thus make operating loss
Thus pay no tax
Put themselves into voluntary administration
Pass liabilities to suppliers and Vat man and pensioners
Start again

Bloody public sector - draining all our resources!
Private sector - wonderful

marlot

le_loup wrote: »

...
Take on a loan from another subsidiary in tax haven
Thus make operating loss
Thus pay no tax...

I'm fed up of seeing companies who have run for decades with little debt get bought out for huge sums - because the incoming owners know they'll finance the purchase price with debt and so be able to run away to their banks with the inherent worth of the business.

Mnd

And on a smaller scale, if you have given toys'r'us vouchers (like we have!) Use them quick!

westv

Ah, vouchers!
You exchange cash, which can be used anywhere at any time, for a piece of paper that can only be used in certain shops and which can sometimes disappear in a puff of smoke if you don't use it in time.

le_loup

I see the Pension Protection Fund has won - but only by getting the £9mil over 3 years. Let's hope that T-4-U lasts long enough to put the money in before the rest of us have to stump up to keep the private equity owner in new Lamborghinis.