For plumbers based in Bristol, the job can be hard, especially during the winter months.Their Northern Ireland cousins, however have been suffering. They’re being driven into bankruptcy and despair due to a pension scheme trap that they’re stuck in.
The issue involves employers who paid voluntary contributions into an industry-wide plumbers’ pension scheme. The scheme went nowhere, resulting in hundreds of employers stuck with the pension debts of thousands of former workers; resulting in them getting saddled with the bill.
One particularly bad example is Co Armagh plumber, Gerry Rafferty, aged 55, facing a bill of around £2M. Rafferty hails from Mullaghbawn runs Rafferty and Tomany with his partner, 78-year-old Thomas. He’s been a member of the Scottish and Northern Irelan Plumbing Employers Federation for more than 3 decades now, and, in that time, has contributed to the pensions and national insurance for 15 employees, all while remaining fully tax compliant.
Now, after more than 30 years of working, making sure his bills and taxes were paid, and his employees were well taken care of, Rafferty’s plans for retirement; to enjoy time with his wife and family away from the pressures of work, has gone down the drain.
As a result of the scheme, plumbers like him have bills that aren’t really theirs, but, thanks to a technicality that hasn’t been dealt with by the Government, means that they’re still liable for handling them.
There’s a hole in the pension, Rafferty says, and the smaller plumbers are being used to plug it.
Their business unwittingly triggered what is called a Section 75 back in 2010 when their last employee left in the midst of an economic downturn. Rafferty only received a letter informing him of the fact in 2017, and, even then, he was not informed of how much he had to pay.
Plumbers in Northern Ireland, unlike their cousins based in Bristol, are stuck in a Hotel California-style pension scheme where they can try to check out, but can’t actually leave; they’re effectively imprisoned by the industry pension scheme and face bankruptcy, losing their homes, their business and their life savings, if they try to leave.
The workers trigger a Section 75 debt if they withdraw, get too sick to work and stop, retire, or die. Under Section 75 of the Pensions Act of 1995, these are the conditions for getting a Section 75 employer debt, which is calculated on a buy-out basis, which tests whether or not there would be enough assets in the scheme to ensure all member benefits.
The theory behind it is to ensure that employers couldn’t simply walk away from their pension obligations.
The plumbing industry scheme was funded completely back in 2014, but now has a large deficit. On top of that, plunging interest rates and annuity costs means that, should the scheme need to buy annuities, it would result in a deficit of about £1 billion.
An overhaul is required to make sure that the scheme works fairly, so good, law-abiding employers don’t get roped into bankruptcy.