This report outlines why we opened an engagement in respect of The Edinburgh Woollen Mill Ltd Retirement Benefits Scheme following the insolvency of its sole sponsoring employer in November 2020. Due to concerns about the circumstances leading up to the insolvency, we opened an enquiry and issued several statutory notices to gather relevant evidence and consider whether to use our anti-avoidance powers.
Throughout the enquiry, we maintained an active dialogue with the entity that acquired the employer’s business from its administration, Purepay Retail Limited (Purepay). This engagement was pivotal in securing a scheme rescue in December 2024. The scheme has now exited the Pension Protection Fund’s (PPF) assessment period. As a result of this rescue, the scheme is now substantially better funded and supported by a profitable ongoing employer, ensuring a better chance of members receiving their benefits in full.
Published: 26 August 2025
Key points at a glance
- We collaborated closely with Purepay, the entity that acquired the former employer’s business and negotiated alongside the trustee and the PPF.
- The scheme rescue prevented a reduction in members’ benefits. Without it, the scheme would have transferred to the PPF or secured benefits in excess of what the PPF would provide but below full benefits with an insurer or similar. This report highlights our proactive measures to prevent such an outcome.
- We welcome the rescue of the scheme by Purepay agreeing to become the scheme’s ongoing statutory employer. The rescue has improved the chances of members receiving their benefits in full.
- Purepay’s proactive action has eliminated the need for us to pursue a formal anti-avoidance case, which could have led to years of uncertainty for members.
Case summary
This report outlines our regulatory intervention concerning The Edinburgh Woollen Mill Ltd Retirement Benefits Scheme. The intervention was initiated following the insolvency of the scheme’s sole sponsoring employer, EM2020 Realisations Limited (formerly known as The Edinburgh Woollen Mill Limited), in November 2020.
Due to concerns regarding the circumstances leading to the employer’s insolvency, we opened an enquiry. These concerns included the payment of material dividends by the employer and the assignment of security from the group’s banks to the employer’s ultimate parent company, both events taking place in the months leading up to the employer’s insolvency. Concurrent with our enquiry, negotiations to rescue the scheme commenced with Purepay. These negotiations resulted in a scheme rescue which became effective in December 2024, resulting in a material lump sum cash payment to the scheme and Purepay taking over as the scheme’s sponsoring employer.
Details of the scheme:
- 219 members as at 5 April 2023
- 54 defined benefit deferred members
- 165 defined benefit pensioner members
- £37 million assets at March 2022 valuation
Background
The scheme was established in 1974. The employer was part of a group of retail businesses owned by The Edinburgh Woollen Mill Limited (Group) as the top parent company.
Prior to the impact of the COVID-19 lockdowns beginning in March 2020, both the employer and the wider group had consistently generated significant profits and cash flow and paid deficit repair contributions to the scheme in accordance with the schedule of contributions.
The group’s businesses were significantly impacted by the COVID-19 lockdowns. On 5 November 2020, two insolvency practitioners from FRP were appointed as administrators to the employer. According to the administrators’ proposals dated 24 December 2020, the following events had occurred prior to the insolvency:
- In August 2020 the group’s owner approached FRP to discuss strategic options for the group’s businesses including the employer. This led to an accelerated mergers and acquisition process for the employer’s business. However, by 9 October 2020, no buyer had been identified, and the directors filed a Notice of Intention to appoint Administrators (NOI) at the Court of Session in Edinburgh.
- A further NOI was filed on 23 October 2020 to allow further time for the sale process to be exhausted.
- The administrators were appointed on 5 November 2020.
- The administrators’ report noted that Group had become a secured creditor of the employer by taking over a floating charge and debenture that had originally been issued to Barclays Bank in 2019. This transfer was completed in August 2020 and perfected in October 2020.
- The employer and other businesses in the group, including Duvetco Limited, Peacocks Stores Limited, and Jaegar Retail Limited, owed £140 million to Group under this security. There was no evidence in the administrators’ proposals, nor from any other publicly available source, explaining how this debt obligation had arisen.
- Due to this secured debt, any financial distributions, including in respect of the debt due to the scheme, to be received from the administration by the company’s unsecured creditors, would be limited to the prescribed part of a maximum of £600,000.
Purepay acquired the employer’s business on 24 December 2020. According to its filed accounts for the period to 26 February 2022, the company initially took over 244 of the employer’s stores and closed and/or relocated 61 stores during that time. Purepay is connected to the employer through shared directors. Its accounts show that the group is funded by Banbury Street Limited, which is owned by Banbury Street Holdings Limited.
Regulatory action
We were contacted by the covenant adviser to the scheme’s trustee in October 2020, expressing concerns about a lack of information regarding the employer’s current financial position and the apparent risk of the company entering insolvency proceedings. Despite requests to the company, the trustee had not received any update on the employer’s financial position for several months.
Following confirmation of the company’s administration, we issued a series of statutory notices under section 72 of the Pensions Act 2004, requiring certain recent financial information about the employer and group. While acknowledging the obvious impact of the COVID-19 lockdowns on the employer’s trading, we were concerned about the employer’s rapid insolvency, given the employer’s (and the wider group’s) history of profitability and cash generation, and the significant COVID-19 assistance that may have been available, such as furlough payments for the employer’s staff.
After receiving information in response to several statutory notices, we had concerns about a series of events that took place before employer’s insolvency:
- In March and April 2020, the employer paid £50 million in dividends, and other companies in the group paid £185 million in dividends to EWM (Topco) Limited, an intermediate holding company.
- Between March and September 2020, EWM (Topco) Limited made onward dividend payments to Group of £235 million.
- Between March 2020 and September 2020, a sum of £235 million was loaned back from Group to its subsidiaries apparently for investment and working capital purposes.
- In March 2020, a £100 million Revolving Credit Facility (RCF) provided by the group’s banks was fully drawn down, which did not appear to have been immediately necessary for working capital purposes.
- The RCF was fully repaid in August 2020. This payment coincided with the assignment of the floating charge and debenture from Barclays Bank to Group, which was subsequently perfected in October 2020.
By mid-2021, we had gathered enough information to consider opening a formal anti-avoidance investigation.
At this stage, Purepay proposed a potential rescue of the scheme.
In response, we, alongside the trustee and the PPF, entered into negotiations with Purepay over terms that would be acceptable to the trustee and sufficient to enable us to cease our regulatory intervention.
As part of the proposed arrangement, Purepay would take over as the scheme’s statutory employer. In addition, we sought a significant up-front lump-sum contribution to the scheme to mitigate the detriment caused by the employer’s insolvency. Further important terms were negotiated to improve the scheme’s security post-rescue.
A major factor delaying the finalisation of a scheme rescue was the need for Purepay to produce audited accounts for 2022 and 2023. These were required to provide evidence to the trustee that the company was trading profitably and capable of providing ongoing support to the scheme. Both sets of accounts were filed at Companies House in July 2024.
The 2023 accounts showed a significant operating profit of £8.1 million and profit before tax of £3.8 million in the 52-week period ending 25 February 2023. The audit opinion was unqualified. Following further covenant advice the trustee was prepared (alongside the other legal agreements) to enter into an arrangement under which the scheme would exit the PPF’s assessment period, and Purepay would take over as the scheme’s statutory employer through a Scheme Apportionment Arrangement (SAA).
The SAA and the scheme rescue became legally effective in December 2024.
The main terms of the scheme rescue were:
- A lump-sum cash contribution of £7 million made by Purepay to the scheme.
- A recovery plan period ending in March 2028 was agreed for the scheme’s latest triennial valuation, with the technical provisions set at prudent levels.
- A suite of covenant protections and downside mechanisms with both Purepay and Banbury Street Limited both on an ongoing and insolvency basis. These protections apply until certain very prudent funding levels are met, such that the scheme has little or no reliance on the covenant.
Outcome
Our intervention in this case underscores our commitment to protecting the interests of pension scheme members and ensuring our actions are targeted where they can have the most significant impact.
Through sustained engagement, we helped strengthen the trustee’s position. Our collaborative approach, working closely with the trustee and the PPF, was crucial in securing a positive outcome for scheme members. As a result, the scheme is now funded well above the PPF funding level and is expected to achieve full funding on a low dependency basis within the next three to four years.
It is vital that sponsoring employers keep pension scheme trustees fully up to date with the employer’s financial position and prospects, particularly when the employer is facing financial distress. Where pension scheme members’ interests are at risk and an employer’s viability is in question, we will not hesitate to intervene. Transparency is critical to effective regulatory oversight and to preserving the long-term security of pension schemes.