Mothercare finalizes full buyout of DB scheme
Mothercare has finalized the purchase of its executive defined benefit pension scheme, moving all liabilities and assets to an insurer and ending any ongoing legal responsibility for the company.
Buyout details and financial impact
The transaction closed on 31 March 2026, just after Mothercare’s fiscal year ended. The move will see the executive scheme removed from the group’s balance sheet for the year ending 27 March 2027. The company says the buyout should create a settlement gain of roughly £0.6 million, reflecting the gap between the scheme’s obligation at settlement and the premium paid, which includes transaction costs.
According to the most recent actuarial valuation dated 31 March 2023, the executive scheme held assets of £81.2 million against liabilities of £80.5 million, leaving a modest surplus. By contrast, the staff scheme remains in deficit, with assets of £197.6 million and liabilities of £232.6 million, producing a £35 million shortfall on a technical provisions basis.
The two schemes are legally distinct, meaning the executive surplus cannot be used to offset the staff deficit. Mothercare confirmed the staff deficit stayed at £35 million as of 30 June 2026, its latest available estimate. This marks an improvement from the £101.7 million deficit recorded on 31 March 2020.
Future contributions and valuation
Previously agreed deficit‑repair contributions for the staff scheme, totalling £6 million for the years to March 2026 and March 2027, have been deferred to preserve cash while the company seeks growth opportunities. The trustee has accepted the deferral until March 2027, with a revised schedule to be set by 31 March 2027. Contributions are expected to restart on 19 April 2027 at a level deemed affordable by the trustee.
Before the deferral, the plan called for contributions of £3 million per year in 2026 and 2027, rising to £4 million in 2028 and 2029, then £5 million in 2030 and 2031, £6 million in 2032, and a final £0.5 million in 2033.
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A new triennial valuation for the staff scheme, effective 31 March 2026, will be carried out over the next year.
Overall pension obligation trends
During the past year, Mothercare’s total retirement benefit obligation fell from £21.1 million to £20.1 million. Scheme liabilities decreased from £248.3 million to £239.7 million, helped by favourable shifts in financial assumptions, including a higher discount rate that generated a £13.9 million gain on liabilities.
Scheme assets slipped from £227.2 million to £219.6 million, largely because investment returns fell short of expectations, creating an asset experience loss of £5.7 million. An actuarial gain of £3.3 million was recorded for the year.
The company’s ability to meet its pension commitments will hinge on how quickly it can stabilise cash flow and secure additional growth.
Chairman Clive Whiley said the group’s recent financial performance has been “resilient,” despite uncertainty in the Middle East and the termination of its UK arrangement with Boots. He noted that discussions continue to restore “critical mass,” supported by recent refinancing and a closer alignment between secured creditors and shareholders.
