‘Last man standing’ scheme

Plumbing employers from Orkney to Somerset are being hit with debt recovery notices varying in size upon triggering liability to orphan debt.

Section 75 was the result of a sweeping review of pension regulation after Robert Maxwell stole millions from the Mirror Group pension scheme the 1990s, leaving employees bereft.

The Pensions Act 1995 introduced a “minimum funding requirement” for pension funds and “Section 75 pension debt”, which meant if an employer “departed” a scheme, they could still be pursued for any shortfall.

Plumbing Pensions was judged to be fully-funded, but a further reform in 2005 led to it being deemed underfunded and anyone who “departed the scheme” found themselves liable for a share of the “shortfall”.

As a “last man standing scheme”, those still in it had to pick up the liabilities of those who had already left.

As well as paying their own exit fee for leaving the scheme, Plumbing Pensions UK have spent years working on a formula to decide how much each subscriber needs to contribute towards paying off the orphan debt.

The exit fee for each company is calculated and is based on the size of their company.

However, the equation used to calculate the orphan debt total each firm needs to contribute is incredibly complex and has taken years to agree.

PEAG founder Fraser Lawrence said: “The size of the bill each company receives is all based on the length of time they have been with Plumbing Pensions UK, the number of employees they have enrolled and how many years each employee has been subscribed for.

“Plumbing Pensions UK spent years to work out a formula for how they would bill companies to recover the orphan debt. It’s very complicated.”

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It’s very complicated. FRASER LAWRENCE