The Mothercare Pension Scheme has “materially reduced” its deficit from £124.6m in March 2020 to £39m in March 2023, according to the group's latest trading update.

The update revealed that the latest analysis of the pension schemes, including an adjustment for the expected reduction in life expectancies, estimated a deficit of approximately £39m at 31 March 2023.

This was based on total assets at £198m and total liabilities of £237m.

The update also confirmed that the trustees are currently undertaking a triennial actuarial valuation as at 31 March 2023, clarifying that the results of this formal valuations may materially differ once the trustees have completed their assessment.

In particular, the group explained that the trustees are looking to review the assumptions used to determine the liabilities, including the mortality assumption, noting that recent mortality experience for the UK suggests that longevity improvements are not as high as previously expected, in turn leading to a reduction in pension scheme liabilities.

The scheme's deficit reduction contributions will also be reviewed once the actuarial valuation as at 31 March 2023 is completed.

Additionally, the trustees, in determining the amount of ongoing cash contributions, recognised the current level of borrowings, stating that they would be prepared to look afresh at the valuation assumptions if the covenant improves after the valuation date, for example via an equity linked structure, which could reduce the deficit further.

Commenting on the trading update, Mothercare chairman, Clive Whiley, stated: “Once again our results demonstrate the resilience we have introduced to the business over recent years, where we continue to generate both profit and cash.

"This would not have been possible without the support of all of our colleagues, franchisees and manufacturing partners whom I would like to thank on behalf of the board.

"Although our immediate priority remains to support our franchise partners as they emerge from a period of suppressed demand, ultimately for the benefit of our own business, we have also redoubled our efforts to restore critical mass.

"Accordingly we are engaged in discussions to drive the Mothercare brand globally by widening the bandwidth of our product offering, alongside penetration into new territories via a variety of routes to market.”

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