Ministers target insolvency loophole
Government ministers will look at introducing legislation to close a loophole in pensions law that has left at least 40 members of a single scheme without a safety net to protect retirement promises after their employer became insolvent.
The scheme, the G&H Pension Scheme, was left without an employer to make contributions to the plan after the company that had taken responsibility for the plan’s assets and liabilities, Zejwa, became insolvent in 2009.
The scheme was closed in 1996 and in 2002, the parent company, George and Harding, ceased trading. The business was purchased that year by a new owner, Zejwa.
But Ros Altmann (pictured), director-general of Saga Group and a pensions advisor who led the drive to compensate those who lost their retirement funds when employers became insolvent prior to 2005, said she had been contacted by trustees of the G&H Pension Scheme after Zejwa went into liquidation in 2009.
The Pension Protection Fund – the safety net for retirement promises of insolvent employers – refused to take on the assets and liabilities of that scheme because the insolvent company never actually employed any of those workers covered by the scheme.
The Department for Work and Pensions initially suggested that the matter was an administrative one for the PPF, but has now conceded that legislative changes maybe needed to address the loophole.
“We are looking at the details of this case, and will bring forward legislation if schemes are not being protected appropriately,” the DWP said.
Pensions lawyers have said the loophole is probably an oversight and reflects a set of circumstances that the authors of the original Pensions Act of 2004 – which created both the PPF and the Pensions Regulator – could not have foreseen.
Nevertheless, Jane Samsworth, partner in the pensions practice at Hogans Lovells, said she was aware of other small schemes in similar situations.
“To be sure, there are anomalies in the law, and there are other companies in this situation,” Samsworth said.
The PPF rejected the notion that the loophole is an administrative matter. “We just implement the rules,” a spokesman said. “We cannot bend the rules.”