Hole in Harrods pension fund grows

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The Independent Online

The Harrods owner Mohamed al-Fayed paid himself £72m in dividends from the Knightsbridge department store in its most recent financial year, it emerged yesterday.

The private company's accounts - filed at Companies House - showed that during the year ending 28 January, Mr Fayed took home £17m in dividends, compared with £39m the previous year. However, in a note to the accounts, it said that sum was topped up with a further £55m "since the balance sheet date".

A Harrods spokesman said the massive dividend was paid out of the company's substantial reserves of surplus cash. Mr Fayed's payout came despite the company's decision to close its final-salary pension scheme which had offered a guaranteed retirement income to its staff.

The accounts reveal that the 1,500-member scheme had a funding black hole of £106.7m at 28 January 2006, compared with £79m the previous year. In April the company said it would plug the gap by paying in £90m over the next 10 years, but said keeping the plan open was an unacceptable risk. The company now offers staff a so-called defined contribution scheme, whose returns are not guaranteed because they are linked to the performance of investments.

Harrods said pre-tax profits for the year increased by £3.2m to £22.3m on record sales of £513.5m, up from £492.3m. The company said refurbishment work continued and that it had invested "tens of millions" across the business to improve infrastructure and open new departments.

Mr Fayed said: "Despite the obvious challenges delivered to us in July, the year finished very well and we continue to reap the benefit from our ongoing investment and improved product offer across all divisions.

"The momentum from the latter part of the last financial year has been carried forward into this."