Concern for plumbing employers as scheme moves to end future accrual

Work and Pensions Select Committee chair, Frank Field, has expressed his concern for plumbing employers as the scheme’s trustee considers closing it to future accrual.

He also articulated his worries about the lack of communication employers received in relation to the scheme’s debts and the problems they could face as a result.

Field said: “Employers do not appear to have been sent section 75 debt figures for many years. Nor were they alerted to the problems they would face.

“It is very disappointing that many of these employers might have been in a better position, or at a minimum better informed, if they have received better support from the scheme.”

The issues relate to difficulties the employers could face if they have an obligation to pay for employer debt, as, under the employer debt legislation, when one employer ceases to employ any active members into a multi-employer scheme, there is the requirement to make a payment to the scheme, based on the employer’s share of the deficit calculated on a full buyout basis.

The legislation relating to section 75 debt is a particular issue within the Plumbing and Mechanical Services Industry Pension Scheme as many of the employers are smaller, family-owned businesses.

In April 2019, a plumbing company was forced to cease operations after receiving a bill of £395,200 from its pension scheme.

Field stated: “A number of those unable to sell or pass on their business remain at risk of personal bankruptcy, due in part to other employers leaving the scheme without meeting their full section 75 debts.”

In a response, Plumbing Pensions chief executive, Kate Yates, said: “Closing the scheme does not trigger an employer debt and in practice will significantly reduce the chance of an employer inadvertently triggering a section 75 employer debt in future.

“The trustee has sought to help support the employers through the employer debt process but it is not the trustee’s role to advise employers about pension obligations.”

Pensions Minister Guy Opperman noted that, following meetings with representatives, employers and members from the scheme and with the Scottish and Northern Ireland Plumbing Employers Federation, his officials has concluded that the current method of calculating section 75 employer debt was the “most effective way of protecting members and remaining employers in a multi-employer scheme”.

This is despite the fact that, since 2005 when this area of legislation was strengthened, the trustees of the plumbers scheme have not been able to calculate or recover debts, while it also has not been able to provide estimated on the level of potential debts until recently.

He continued: “This is a very difficult case where there are no easy solutions. It’s important that any attempts to help employers is balances against the need to ensure that the thousands of members who rely on this scheme are protected.”

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