I am grateful for this opportunity to raise the issue of the plumbers’ pension scheme, which affects small plumbing businesses in my constituency and in those of my colleagues across this Chamber. Most plumbers are part of a multi-employer pension scheme such as the Plumbing and Mechanical Services (UK) Industry Pension Scheme, which is run by the Scottish and Northern Ireland Plumbing Employers Federation. The scheme currently has more than 35,000 members, more than 350 contributing employers and, as of April 2017, £1.9 billion in assets. Since its inception in 1975, about 4,000 employers have paid into the scheme. Members would now like to know whether the 101%—the assets have been found to cover 101% of the liabilities—currently in the scheme is on a buyout basis or on a technical provision basis.
Fundamentally, this issue is a consequence of section 75 of the Pensions Act 1995, as amended in 2005, which covers what happens when an employer ceases to participate in a multi-employer pension scheme. When a participating employer leaves the scheme, either by becoming insolvent, winding up, changing its legal status or even simply no longer having any active members in the scheme, it becomes liable for a section 75 employer debt, to cover its share of the scheme’s liabilities. The size of a section 75 employer debt can be known with any certainty only when the employer ceases to participate, due to the variety of factors that go into how the debt is calculated, which range from how many scheme members the employer employs and how old they are, to the value of the scheme’s assets and to so-called “orphan liabilities”. Orphan liabilities are those liabilities that cannot be identified from those who have left the scheme in the past. So, in essence, employers leaving the scheme today are on the hook for liabilities incurred by employers who left the scheme years ago.
There is nothing objectionable about the idea of a section 75 employer debt in itself. The premise that employers leaving a pension scheme should leave on terms that protect the integrity of that pension scheme is entirely reasonable. However, the legislation is not suited to the plumbers’ pension scheme, and has inadvertently left many plumbers facing vast liabilities when they come up to retirement. Ironically, a measure designed, in good faith, to protect people’s retirements has in this case put many people’s retirements in jeopardy.