A Government scheme bit like Hotel California

PLUMBERS are in a Hotel Californiastyle pension scheme where they can try to check out, but they can never leave.

These people are effectively imprisoned and face bankruptcy, the loss of their homes, their business and their life savings if they quit.

They trigger a Section 75 debt if they withdraw from the scheme get too sick to work and stop retire, or, die.

Under section 75 of the Pensions Act 1995, employers become liable for the debt when they withdraw from the scheme.

It is calculated on a “buy-out” basis, which tests whether there would be sufficient assets in the scheme to secure all the member benefits by buying annuity contracts from an insurance company.

The theory behind the controversial Section 75 debt was to ensure employers could not walk away from their obligations and the legislation has been around since the 1970s.

The plumbing industry scheme was fully funded in 2014, but now has a huge deficit.

But interest rates plunged and annuity costs soared meaning if the scheme needed to buy annuities, it has been estimated it would have a £1billion shortfall.

An overhaul is required to ensure it operates fairly, so good employers are not forced into bankruptcy by a skewed law.

For now plumbers have been checkmated by the legislation, left with no room to manoeuvre, no escape because every possible action eventually triggers a Section 75 debt that is still not able to be accurately calculated.

Other industries are set to be hit next causing further distress to people.