In a recent meeting with administrators, GMB said it was informed there was ‘no longer any prospect that the majority of the business will be saved’
Meanwhile, joint administrators Jane Steer, Zelf Hussain and Edward Williams of PwC said that in the immediate term, all stores will remain open, continue to trade and staff continue to be paid, and that
“contrary to speculation, there are currently no plans to close any stores next week”.
“Since our appointment as administrators of Wilko we have held extensive discussions with parties who expressed an interest in buying all or part of the business.
“While discussions continue with those interested in buying parts of the business, it’s clear that the nature of this interest is not focused on the whole group. Sadly, it is therefore likely that there will be redundancies and store closures in the future and it has today been necessary to update employee representatives.”
The grim reality facing wilko staff is redundancy and loss of income and pension contributions. For former staff who are members of Wilko’s DB plan, there is the prospect of benefits being paid by the PPF.
There is little hope of a third party buying the business as a whole, but there is hope that the pension scheme might still provide PPF+ benefits , if a view on it can be taken.
This would require a new sponsor and perhaps a capital backed journey plan. I note that PWC – as well as being administrators, also consider themselves expert on “CBJP’s. I quote from a recent blog of theirs.
Underwritten solutions are where a third party provider underwrites a defined benefit (DB) pension scheme’s journey plan to its target end game. Also known as capital-backed solutions, these are typically provided by an asset manager.
Underwritten solutions increase the likelihood of a pension scheme reaching full funding in a set timeframe by underwriting a level of investment performance to increase efficiency and security of members’ benefits.
Trustees and sponsors will want to understand the risks associated with these solutions such as counterparty risk and how they compare with other solutions in the market.
A number of market participants offer solutions to enhance the security of members’ pension benefits and deliver full funding in a more capital efficient way. The key benefits of underwritten solutions are:
- The provider typically underwrites a level of investment return or funding outcome backed by an adequate amount of capital.
- Reduced volatility associated with the pension scheme’s funding position and / or an accelerated expected time to reach the funding target through higher returns.
- A capital buffer that enhances the security of members’ benefits and reduces the pension scheme’s reliance on the sponsoring covenant (although the sponsoring covenant remains in place).
- Reshaped existing recovery plans to reduce the risks of further deficit contributions arising.
In addition to capital and asset manager services, providers of underwritten solutions are expected to deliver value through their ability to source suitable assets such as private market assets to enhance the risk-return profile of the pension scheme’s assets.
Let’s hope that words become action at wilko. TPR is looking to demonstrate its “new mindset” – let’s hope we see evidence here.
Trustees and future sponsors may want to consider
Trustees and sponsors may want to assess the following:
- Does the solution enhance member outcomes?
- What are the residual risks to trustees and sponsors?
- What are the costs and complexities associated with the solution?
Fingers crossed for wilko staff and fingers crossed for their jobs and pensions.
