£200m plan for Harrods to offload pension risk

Published on Sunday 29 November 2009 20:41

HARRODS is understood to be considering the sale of its £200 million pension fund.

In a buy-out deal the retailer, owned by Mohamed al-Fayed, is thought to be seeking to offload its pension obligations to more than 1,000 staff by selling the scheme to a specialist insurer.

It has been reported that a so-called buy-in deal, where certain liabilities are insured rather than sold, is also being discussed.

The company recently brought forward the review of its pension fund to consider future funding options.

A spokesman for Harrods said: "Harrods is carrying out a statutory valuation of the fund, which is normal practice every three years. However, we are bringing this forward a little to make sure the company and the pension fund is protected. We are looking at a range of options for the fund."

The pension fund was nearly 20m in deficit at the end of January, according to accounts filed at Companies House in the summer. However, the shortfall is likely to have reduced as equity markets have rallied since then.

The London-based retailer closed its final-salary pension scheme in 2006 to new entrants, instead offering staff access to a less generous money-purchase scheme. At the time, the pension fund carried a deficit of around 106m, with the company saying the open scheme "presented an unacceptable future risk for its employees and the group".

But in April 2006, Harrods committed to plug the shortfall by injecting 90m into the fund by 2016.

The news comes just days after a report warned that many more pension schemes will close in the next five years, to both new and existing members.

Just 23 per cent of final-salary pension schemes in the private sector are still open to new joiners, the National Association of Pension Funds also said.

A year ago the figure stood at 28 per cent, but since then more schemes have closed, both to new members and existing ones.