‘We were good employers, now pensions will ruin us’

Richard Robson and Richard Constable had always tried to do the right thing by their employees. When they took over S Butterworth, a Yorkshire plumbing firm, in the Eighties, they kept making monthly payments into a pension for themselves and their two staff members.

As plumbers by trade, they knew little about pensions and so were part of a “multi-employer” scheme called Plumbing Pensions, which managed the assets of thousands of small companies around the country.

When Mr Robson, now 69, retired in 2011, they received a letter telling them there was a debt to be paid, but it was only after Mr Constable, 60, retired last year, after he had received treatment for bowel cancer, that the true implications became clear.

Mr Constable was called by the scheme in September with the news: they owed £844,800. He had to break this to his business partner.

Mr Robson said: “I was in a state of shock; I couldn’t sleep. How many people have that sort of money in the bank? It’s ridiculous.”

The pair had fallen victim to an obscure piece of legislation called section 75. The rules were introduced in the Nineties, after it emerged that Robert Maxwell had plundered millions from the Mirror Group pension scheme, and toughened up in 2005 after a scandal involving the shipping company Maersk. But for the thousands of members of Plumbing Pensions the law has had unintended consequences.

Hundreds of employers are now being handed huge bills under the rules, despite the scheme itself saying it is fully funded and expects there to be sufficient investment growth to allow it to continue to pay out.

Many of those affected complain that they weren’t given sufficient notice of the potential charge.

A spokesman for Plumbing Pensions said it had written to employers and tried to offer flexible payment arrangements where possible, but said its trustees were not required to tell firms of their legal responsibilities. She said employers should take independent advice.

“Plumbing Pensions recognises that pursuing significant sums of money from small business owners is very stressful and distressing,” she added. “We are working hard to ensure employers have all the information and guidance they need to support them through this process.”

Another complaint of campaigners is that Plumbing Pensions has allowed thousands of employers to leave since 2005 with no penalty. More than 4,000 employers have used Plumbing Pensions, but only 560 have triggered section 75 debts over that time. Debts are triggered when a firm no longer employs anyone still saving into the scheme. A spokesman said it had only recently been able to calculate the size of the debts because of complex legislation and a lack of data.

According to the Government, there are as many as 1,000 schemes that could fall foul of the same problem. David Davison of Spence & Partners, a pension consultancy, said there was a particular risk to the charity sector.

The Government has shown a willingness to address the issue, but there has been no long-term fix proposed. Since 2005 it has introduced new ways to allow some employers to pay a part, or none, of their debts. But Mike Cherry of the Federation of Small Businesses said the new government should revisit the problem. “The Government’s decision last year to close the book on further review of this unique issue was the wrong one,” he said. “A small business owner shouldn’t be left as the last man standing in this way.”

For Mr Robson and Mr Constable (pictured, left), the frustration is that they were trying to do the right thing by their staff. Mr Robson said: “We paid our money in good faith. If it wasn’t for employers like us, there wouldn’t be anyone in the pension in the first place.”

‘If it wasn’t for employers like us, there wouldn’t be anyone in the pension in the first place’