09 June 2022

Commentary / Practical Considerations

In this case TPR issued a regulatory intervention report in relation to Arcadia Group Limited (AGL). This case study is one where TPR issued a report to highlight good practice and educate the industry on the principles it assesses CVAs against.

Case summary

AGL was the sponsoring employer of two DB schemes. 

AGL was facing financial struggles in the context of a struggling high street retail sector and structural changes in the market.

Due to liquidity concerns, the directors of AGL put forward CVA proposals, with the aim of reducing rents.

TPR notes that a CVA is a process led by an insolvency practitioner to seek a statutory agreement between a company and its creditors to amend the agreed terms for repayments of debts. For a CVA to be successful, it needs to be supported by 75 per cent of the creditors who vote on it.

The pension schemes (as creditors) had the power to block one of the CVAs.

As part of the CVAs, the trustees of the two schemes were asked to agree to a reduction in deficit reduction contributions from circa £50 million to circa £25 million per annum.

At an early stage AGL presented a business turnaround plan (including the CVA proposal) to the trustees, TPR and the PPF. This included the proposal to reduce deficit reduction contributions.

The schemes were granted security over group assets and a cash injection from the majority shareholder backed by a guarantee.

The trustees and AGL continued to engage with TPR and the PPF and the PPF ultimately voted in favour of the CVA.

Summary of decision

TPR confirmed in the section 12 report that the circumstances in which CVAs are proposed may be similar to those where a regulated apportionment arrangement (RAA) may otherwise be sought and in such a case TPR will assess the CVA proposal in line with the principles listed in TPR’s 2010 statement on RAAs. TPR’s application of the principles can be summarised as follows:

1. Whether the insolvency of the employer would be otherwise inevitable: TPR was satisfied that the proposed restructure was necessary for the business to support its viability in the long term and avoid any future insolvency.

2. Whether the scheme might receive more from an insolvency: in this case the schemes were given security over group assets to a value that exceeded their estimated insolvency outcome and it was agreed that a cash injection will be payable from the majority shareholder in the event of future insolvency. TPR set out that if mitigation cannot be provided in cash then alternative mitigation needs to be made available and the value of non-cash or future cash mitigation should allow for both the inherent risk of a promise of future mitigation, and the value of the time delay to the scheme in receiving that mitigation.

3. Whether a better outcome might be attained for the scheme by other means, including the use of our powers: TPR concluded that a better outcome could not be attained for the schemes by other means.

4. The position of the remainder of the employer group, where there is a group

5.The outcome of the proposals for other creditors (equitable treatment): TPR explained that a scheme’s status as long-term involuntary creditor should be reflected in any proposal and TPR will not generally expect other creditors to receive better treatment than the scheme. TPR also stated that it will consider the impact on the PPF funding position and will not generally expect schemes to be asked to defer or postpone DRCs. In the Arcadia case, TPR recognised that the DRCs were not affordable and expected the reduction to be mitigated in a material way. The mitigation was £100 million cash from the majority shareholder backed by a guarantee arrangement and a further £25 million in security. 


TPR used its section 12 Pensions Act 2004 power to issue a regulatory intervention report in relation to AGL.

The purpose of the regulatory intervention report was twofold:

1. to highlight to the industry what TPR expects of employers in CVA scenarios; and

2. to educate employers on the principles TPR assess CVAs against.

This case study shows how transparency and early and continued engagement with TPR and the PPF can lead to positive outcomes for both members and employers where a CVA is envisaged.

Key words

CVA; RAA; distressed employers

Key contact

Clive Pugh

Clive Pugh Pensions Partner and Head of Pensions Regulatory Investigations

  • Pensions Regulatory
  • Pensions Services
  • Pensions Legal Advice 

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