The £1.9 billion ($2.5 billion) Plumbing & Mechanical Services (UK) Industry Pension Scheme has announced it will lock in employers until 31 December 2018, while it reviews the benefits, funding, and covenant of the scheme.
A spokesperson for Plumbing Pensions, which administers the scheme, confirmed that current employer members of the scheme will not be “discharged from their past, present, or future obligations” under the new rules, without the express permission of the trustee.
“The trustee directors felt that a rule change was necessary, to provide all the scheme’s stakeholders with time to discuss and decide on how to secure a strong and equitable future for the scheme,” administrators wrote in a statement.
“Without this rule change, there was a risk that certain employers were able to release themselves from any future obligation to the scheme and so reduce the employer covenant which could worsen the funding and liability position for all employers (and for all members) prior to conclusion of those important discussions.”
The review announcement comes just days before the scheme’s blight is scheduled for debate in the House of Commons, according to a parliamentary listing.
Members of Parliament have been looking at how Section 75 of the U.K. Pensions Act could adversely affect members. The current rules mean that self-employed members may be forced to personally make good any scheme deficit, sparking fears that they could be left penniless.
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Kirstene Hair, the Member of Parliament for Angus, has been among the politicians calling for a change, according to the U.K. record of parliamentary debates. Hair did not respond to a request for comment on Thursday’s debate.
Steve Webb, Royal London’s director of policy, said he has been pushing for a change to Section 75 since he was the U.K. pensions minister.
“The Department of Work and Pensions consulted on this back in 2015 and it is time now for action to make sure that small employers and not unfairly hit by pension costs beyond their ability to pay”
Joe Dabrowski, head of investment and governance at the Pensions and Lifetime Savings Association, said it is important that any changes to the rules don’t create a loophole that lets other employers wriggle out of their obligations.
“You have to have that balance of getting the right fix,” he said. “It may be possible within the existing framework to add some easements, which work for schemes of this type.”
A spokesman for Plumbing Pensions told Institutional Investor he could not provide further details on the alternative arrangements under consideration, but confirmed that the scheme has around 35,000 members.
A change to the rule has been agreed on by the Association of Plumbing & Heating Contractors, Scottish and Northern Ireland Pluming Employers’ Federation, and the U.K. trade union, Unite. Press spokespeople for all three organizations were unavailable for comment.