Harrods, the upmarket London retailer owned by Mohamed al-Fayed, is mulling the sale of its £200 million pension fund in a buy-out deal.
Harrods is thought to be seeking to offload its pension obligations to more than 1,000 staff by selling the scheme to a specialist insurer. A so-called buy-in deal, where certain liabilities are insured rather than sold, is also being discussed.
The company recently brought forward the review of its pension fund to consider future funding options.
A spokesman for Harrods said: “Harrods is carrying out a statutory valuation of the fund, which is normal practice every three years. However, we are bringing this forward a little to make sure the company and the pension fund is protected. We are looking at a range of options for the fund.”
Harrods is believed to be in discussions with a number of firms to take over the running of the pension fund, including Edmund Truell’s Pension Corporation. A spokesman for Pension Corporation declined to comment.
The pension fund was nearly £20m in deficit at the end of January this year, according to accounts filed at Companies House in the summer, however, the shortfall is likely to have reduced as equity markets rallied from March.
In 2006, Harrods axed its final-salary pension scheme to new entrants, instead offering staff access to a less generous money-purchase scheme. At the time, the pension fund carried a deficit of around £106m, with the company saying the open scheme “presented an unacceptable future risk for its employees and the group”.
But in April 2006, Harrods committed to plug the shortfall by injecting £90m into the fund by 2016.
Should Harrods strike a deal on its pension fund it would signal the re-emergence of the pension buyout market, which has been largely closed during the past 12 months.
But recently the market has showed signs of life when Lucida, the private equity-backed insurer led by former Prudential chief executive Jonathan Bloomer, agreed a deal to insure £500m of pension liabilities held by the trustees of the Merchant Navy Officers Pension Fund.