Retailer Toys R Us has fallen into administration today, 28 February, putting 3,000 jobs at risk, and the Pension Protection Fund on standby to take on the company’s pension scheme.

Last-ditch attempts were made to save the company in December 2017, when the PPF agreed to a deal which would have seen the company pay £3.8m into the scheme in 2018, and a further £6m over 2019 and 2020. The PPF today confirmed just £1.1m has been paid into the scheme from the company so far.

The retailer had also agreed to shorten its recovery plan to 10 years, by seeking additional support from its US parent company.

PPF acting chief executive Andy McKinnon said although it is a “disappointing outcome”, it is one the lifeboat fund protected against in its approach to the Company Voluntary Arrangement in December.

“The first of the additional payments secured by us has been paid; we believe therefore that the deficit in the pension scheme is lower than it would have been if the company had entered administration in December. We will now be working to maximise the recovery to the scheme from the administration. Members of the Toys R Us pension scheme can be reassured that the PPF is there to protect them.”

According to the PPF, the Toys R Us pension scheme currently has around 600 members. It said in December 2017 that it has a PPF deficit of £30m and a buyout deficit of £93m, meaning if the scheme is transferred to the PPF there would be a cost to its levy payers.

The administrator for Toys R Us, Simon Thomas, told the BBC that all 105 stores will remain open until further notice. "Whilst this process is likely to affect many Toys R Us staff, whether some or all of the stores will close remains to be decided,” he said.

"We will make every effort to secure a buyer for all or part of the business. The newer, smaller, more interactive stores in the portfolio have been outperforming the older warehouse-style stores that were opened in the 1980s and 1990s."

Commenting, Xafinity Punter Southall principal of Punter Southall Transaction Services, Martin Hunter, said: “It is unfortunate to hear that Toys R Us are yet another case of a business going into administration with pension members losing benefits. The PPF was a party to the restructuring agreement reached just before Christmas, which involved rent reductions and store closures. The PPF would no doubt have been hoping that a turnaround was possible, to keep the scheme out of the PPF, but sadly that may not end up being the case.

“While the members will no longer get the full benefits they were promised in the pension scheme, at least the PPF will step in to provide them with compensation. The scheme will not be particularly big in the context of the PPF, as it has around 600 members and reports have suggested that it has a PPF deficit of about £30m. In contrast, the PPF’s latest annual accounts suggest that it is currently in a strong financial position, with assets of £29bn and a surplus of £5bn. So if the scheme ends up in the PPF as part of the administration, it should not have a material impact on the financial position of the PPF."

Share Story: