Industry experts have highlighted the recent collapse of Wilko as demonstration of the "vital importance" of not only good corporate governance, but also good pensions governance.

Wilko’s defined benefit (DB) pension scheme entered the Pension Protection Fund (PPF) assessment period following the company's fall into administration earlier this month.

Commenting on the news, Cardano Advisory managing director, Alex Hutton-Mills, stressed that despite many companies enjoying record pension scheme surpluses, it's impossible to ignore the fact that there are many schemes, Wilko included, still facing significant pension deficits.

“The recent collapse of high street favourite Wilko has brought into sharp relief the vital importance of not only good corporate governance, but also good pensions governance," he stated.

"Wilko’s scheme is now facing a £16m deficit, a PPF bail out and the likely loss of some benefits for its almost 2,000 members."

Hutton-Mills also warned that the collapse of the high street favourite may not be an isolated case, noting that the latest insolvency stats from the Office for National Statistics (ONS) showed that 248 compulsory liquidations have been recorded in July 2023, up 81 per cent compared to a year ago.

Recent figures from EY-Parthenon also recently showed that nearly one fifth (19 per cent) of all profit warnings issued by UK-listed companies in H1 2023 came from firms sponsoring a DB pension scheme, with rising costs and overheads, as well as persistent economic uncertainty and rising interest rates, a key driver for this.

“Unfortunately, a perfect storm of stubbornly high inflation and interest rates, coupled with a complex macroeconomic environment, has not helped," Hutton-Mills emphasised.

"When loss-making companies make financial decisions which could impact member outcomes, particularly when their pension schemes are also facing a deficit, it is crucial that trustees and other third-party advisers are involved.

"While they may not be able to save a struggling business, they can go some way to ensure appropriate governance measures are followed. Wilko is not the first, and will not be the last business to fail, leaving the financial stability of both current and previous employees in limbo.”

This is not the first time these concerns have been raised, as Hutton-Mils also previously encouraged DB pension scheme trustees to review how they are managing their pension risks in light of the increasing company insolvencies in March.

Despite these concerns, efforts to protect pensions are underway, with industry research revealing that more than half (57 per cent) of pension professionals believe powers given to The Pensions Regulator (TPR) in October 2021 mean DB schemes can expect to achieve a better outcome in a multi-creditor restructuring scenario.

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