A £2bn pension scheme chasing retired business owners for payments of up to £1.2m has been forced to review its governance after no Scottish representatives would serve on its board of trustees.
Plumbing Pensions, a pension scheme in Edinburgh used by over 4000 UK plumbing firms since being set-up in 1975, last year issued so-called Section 75 debt notices to around 100 of its members who are employers.
Many of these businesses are in Scotland and the largest sum the scheme is seeking to recover – £1.2m – is owed by retired Inverness businessman, Murray Menzies.
Section 75 debts do not represent unpaid bills, but rather payments that became due because of a quirk in pensions legislation introduced by the UK Government in 2005.
In court documents filed this year, the trustees of Plumbing Pensions admitted making numerous errors interpreting those laws, resulting in 100 businesses being asked to collectively pay sums totalling millions of pounds.
A number of retirees – including Menzies – do not accept their liabilities, however, arguing that they always paid any monies due when required.
Now, the Scottish and Northern Ireland Plumbing Employers’ Federation (SNIPEF), which normally elects two members to the trustee board, has been unable to find anyone willing to put themselves forward.
This has left SNIPEF’s members, who account for around 200 of the 360 businesses still responsible for funding the scheme, with no say over the way the pension is run.
SNIPEF chief executive Fiona Hodgson told The Ferret: “There are a lot of issues facing the scheme with Section 75, increasing legislation and the petition to the court. You need people with certain experience and skills to deal with everything and we’ve found it difficult more recently to find people.”
Having come under intense pressure from both SNIPEF and the Plumbing Employers Action Group (PEAG), the trustees of Plumbing Pensions have agreed that an external party should now scrutinise how they operate.
Plumbing Pensions chief executive Kate Yates said an independent consultant is expected to be appointed “imminently” to determine whether a new board structure is required for the scheme.
There are a lot of issues facing the scheme with Section 75, increasing legislation and the petition to the court. You need people with certain experience and skills to deal with everything and we’ve found it difficult more recently to find people. Fiona Hodgson, chief executive of Scottish and Northern Ireland's Plumbing Employers' Federation
Currently the board of trustees is made up of chairman, Alan Pickering, another independent director, three representatives from trade union, Unite, and two from the English trade body, the Association of Plumbing and Heating Contractors. A further two seats are reserved for SNIPEF.
PEAG represents the interests of around 50 of the small businesses being chased for money by the scheme. Its spokesman Garry Forster said the group lobbied for a governance review because it wants the current board to be disbanded completely.
“The trustees have failed to apply the law for 14 years,” he said. “What we want is for them to resign and for them to be held accountable for their failures.”
The majority of the companies advised they owe money to the scheme have been able to defer making any payments. However, around 30 are in the same position as Murray Menzies, who cannot defer because he is retired.
Menzies, 72, retired in 2015 and shut down the business he previously ran with his father. He said that because his firm paid everything it was asked to while employing members of the scheme, he does not accept he is liable for the £1.2m advised. He added that even if he did accept it, he does not have the means of paying it.
“Our house has been on the market for some time but even if I was made bankrupt there’s no way that I would have that kind of money,” he said. “I have no intention of giving them money because I don’t feel I owe them money. I don’t have a debt – the scheme might have a debt, but I don’t and neither does anyone else.”
In May, Highlands and Islands MSP David Stewart wrote to pensions minister Guy Opperman on Menzies’ behalf, asking for that group to be given a five-year grace period before having their debts called in.
Last month Opperman responded, noting that, as the trustees had “for a variety of reasons, not been able [to] collect debts that are due” since 2005, “adding further delays to a process which has already suffered significant delays will only exacerbate the problems in this particular scheme”.
Pickering told The Ferret: “Plumbing Pensions recognises that pursuing significant sums of money from small business owners is very stressful and distressing. We are continuing to work hard to ensure employers have all the information they need to support them through this process and help them understand their options.
He added that section 75 legislation was brought in to “protect members benefits” and it “aims to ensure there is enough money in the pension scheme” when an employer leaves a multi-employer pension scheme.
“Since 2005, the Plumbing Pension scheme has been in regular contact with government officials to try and change this law to make it fairer for employees. However, it became clear after extensive discussions with government that they would make no further changes to the legislation,” he continued.
“The scheme therefore has had no choice but to begin seeking payment of section 75 debts from employers that left the Scheme.”
Pickering did not comment on PEAG’s demand that he and his fellow trustees should resign from Plumbing Pensions’ trustee board.
Plumbing Pensions recognises that pursuing significant sums of money from small business owners is very stressful and distressing. We are continuing to work hard to ensure employers have all the information they need to support them through this process and help them understand their options. Alan Pickering, chairman of Plumbing Pensions
When the law was changed in 2005, the aim was to protect staff pensions in the event of large employers going bust. As part of that, the government required businesses to make one-off payments into pension schemes they were no longer going to have an ongoing relationship with.
The impact on schemes such as Plumbing Pensions, which has been used by a large numbers of businesses rather than a single employer, has been disproportionate. This is because anything from the departure of a company’s final employee to the retirement of its owner can trigger the payments.
Sole traders who have periods with an employee followed by periods without, for example, become liable for a payment every time they go back to working alone.
Despite the law being introduced in 2005, Plumbing Pensions did not attempt to collect any of these payments until last year. In the intervening period, hundreds of employers were able to leave the scheme without being asked for an exit payment.
That has left the 360 employers still associated with the scheme responsible for ensuring it has enough money to pay the staff pensions of every business that has ever used it.
One of those remaining employers – a large business based in England – has taken legal action against the trustees, claiming that as so many other businesses were let off with their payments it should be too.
Earlier this year the trustees filed a petition at the Court of Session asking whether they are entitled to use the money in the pension to defend themselves against such cases. In those papers they admitted making several mistakes in relation to how they interpreted the 2005 law.
For example, the papers noted that one business was told in 2010 that if it left the scheme it would not be asked to make any additional contributions. It is now being asked to pay £851,000.
A number of sole traders and partnerships were also told by the trustees that they would not be liable for additional payments if they changed the structure of their businesses. The court documents show that the trustees concede that advice was incorrect and that those companies collectively now owe the scheme £6.3m.