I completely agree with the hon. Gentleman. My constituents also have grave concerns because they could essentially be left with nothing. That is why I shall urge the Government to take up various recommendations later in my speech.
Why then does the legislation have unintended consequences for plumbers? The first issue is that the plumbing industry is mostly composed of small, often family-run businesses that have been established for many years, created local jobs and contributed to their local economies. Such businesses are the lynchpin of our communities. I have huge admiration for this prime example of true, independent entrepreneurialism. They have built businesses that have thus far largely withstood the rise of large corporations and the so-called gig economy.
The legislation is quite simply not made for industries such as plumbing. The turnover of employers leaving the scheme is higher because, of course, many plumbers shut down their businesses when they retire. In many other industries with multi-employer pension schemes, companies tend not to be tied to one specific person and are less likely to close voluntarily, whereas in plumbing there is a steady stream of employers reaching retirement and closing down their businesses, and now suddenly finding themselves liable for huge sums of money.
The turnover of employers, combined with the age of the scheme, has the additional consequence of making the aforementioned orphan liabilities particularly onerous. Much of the scheme’s buy-out deficit comes from employers who left the scheme years ago, and that large liability is now being shared out among currently departing employers. Moreover, although many industries are mostly composed of limited companies, many plumbers own unincorporated businesses, leaving them personally liable for business liabilities such as the crushing section 75 employer debt.
Perhaps a plumber could change their unincorporated business into a limited company, but that in itself could incur an employer debt, leaving plumbers with little room to manoeuvre. They cannot sell the business or even transfer it from parent to child without incurring an employer debt, and nor can they move their employees to a new pension scheme. They are, in effect, trapped in the scheme, with no escape. Plumbers are therefore uniquely and personally exposed to the effects of having to pay a vast amount in employer debt when they retire. Many of the plumbers who have been faced with a massive bill when trying to close down their businesses had absolutely no idea that this could happen to them. It has been a sudden and deeply damaging surprise.
This issue is not 22 years old. The 2005 change from the minimum funding requirement basis to the buy-out basis, which requires a departing employer to pay enough into the scheme such that that employer’s pension liabilities could be bought out with an insurance company, drastically increased the amount for which plumbers could be liable. Until recently, the plumbers’ pension scheme was unable to calculate or estimate section 75 employer debts because the legislation was not easily applicable to the scheme, being as large as it is, and because it did not have all the necessary data. That has had a devastating effect on many plumbers.