Mothercare has completed a full buyout of its executive defined benefit (DB) pension scheme, transferring all liabilities and scheme assets to an insurer and removing any legal or constructive obligation from the company.

The transaction was completed on 31 March 2026, shortly after the end of Mothercare’s financial year, and will result in the Executive Scheme being derecognised from the group’s balance sheet in the year ending 27 March 2027.

The British heritage brand said the buyout is expected to generate a settlement gain of around £0.6m, reflecting the difference between the Executive Scheme’s DB obligation at settlement and the premium paid to the insurer, including transaction costs.

According to the company’s previous actuarial valuation, as at 31 March 2023, the Executive Scheme was in surplus, with assets of £81.2m and liabilities of £80.5m.

In contrast, Mothercare’s Staff Scheme remained in deficit, with assets of £197.6m and liabilities of £232.6m, producing a £35m deficit on a technical provisions basis.

The company stated that the two schemes are legally separate, meaning the Executive Scheme surplus could not be used to offset the Staff Scheme deficit.

Mothercare also confirmed that the Staff Scheme deficit remained at £35m as at 30 June 2026, its latest available estimate.

This represented a significant improvement from the position at 31 March 2020, when the Staff Scheme deficit stood at £101.7m, and the Executive Scheme had a deficit of £22.9m, giving a combined shortfall of £124.6m.

A new triennial valuation of the Staff Scheme, effective 31 March 2026, will take place over the coming year.

Meanwhile, Mothercare also noted that previously agreed deficit repair contributions to the Staff Scheme for the years to March 2026 and March 2027, totalling £6m, have been deferred to support the company’s cash flow while it explores growth opportunities.

The trustee has agreed that these contributions can be deferred until March 2027, with a revised contribution schedule to be agreed by 31 March 2027.

Contributions are expected to resume from 19 April 2027 at a level the trustee considers affordable for the group.

Before the deferral, the agreed contribution schedule was £3m per year in 2026 and 2027, £4m per year in 2028 and 2029, £5m per year in 2030 and 2031, £6m in 2032, and £0.5m in 2033.

Overall, Mothercare’s retirement benefit obligation reduced from £21.1m to £20.1m over the year.

Scheme liabilities fell from £248.3m to £239.7m, due to favourable movements in financial assumptions, including a higher discount rate, which produced a £13.9m gain on liabilities.

Scheme assets also fell from £227.2m to £219.6m, largely due to lower-than-expected investment returns, resulting in an asset experience loss of £5.7m.

The schemes recorded an actuarial gain of £3.3m during the year.

Mothercare chairman, Clive Whiley, argued the company’s recent financial performance had been “resilient”, despite continued uncertainty in the Middle East and the end of its UK arrangement with Boots.

He added that the group remained in discussions aimed at restoring “critical mass”, supported by its recent refinancing and a closer alignment between its secured creditors, including pension and debt holders, and shareholders.

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