Thousands could be affected by new pensions scandal

Thursday 27 January 2011

Thousands could be affected by new pensions scandal

  • More workers and pensioners being stripped of their pensions

A new pensions scandal could once again leave thousands of British pensioners stripped of their pensions and Saga's Director General - pensions expert - Dr Ros Altmann is calling for urgent action.

She has discovered serious flaws in the 2004 Pension Act which was meant to provide proper protection for members of UK final salary pension schemes if their employers went bust.

"This is really serious and we are demanding immediate action from the Government. MPs from all parties must be told that the future for many of their constituents could be in peril unless Parliament acts now", she said.

The George and Harding (G&H) Pension Scheme is being refused entry to the Pension Protection Fund, with members facing losing their pensions. Conor Burns, MP for Bournemouth West, whose constituent Colin Harding is Chair of the Trustees of the G&H Scheme, arranged a meeting with the Pensions minister to try to get the DWP to deal with this problem. Whilst offering interest and sympathy with the case, no solution has been put forward. Action is needed now.

Dr Altmann pointed out it was only three years since the major breakthrough in the campaign she led to rescue 140,000 people who had discovered they had lost some or all of their pensions because of a failure in the protection promised by the 1995 Pensions Act.

"I thought we had seen the end of this terrifying threat but now I discover that flaws in the 2004 pensions legislation means the nightmare has returned. " Dr Altmann said that many would remember the spectre of naked pensioners on the beaches of Brighton and Bournemouth at party conferences trying to get the Government to intervene.

"Unless they act quickly, I can see the risk of more pensioners facing the threat of being stripped of their incomes and doing the same again," she added.

Dr Altmann revealed the latest scandal involves the small G&H scheme with only about 40 members. But that is exactly how the last problem started.

Following Mirror Group boss Robert Maxwell's death in 1992, he was found to have plundered his pension scheme leaving members' pensions in tatters, and the 1995 laws were introduced promising final salary pension scheme members that their pensions would be safe in future. When these assurances turned out to be false, due to flaws in that legislation, 140,000 people lost some or all of their pensions. Their plight turned into a many-year campaign to persuade the Government to take action, during which time many of those affected died without ever having their pensions restored.

After years of pressure, the Pension Protection Fund was set up by the 2004 Pensions Act to make sure anyone paying into a final salary scheme would be covered by an insurance fund which would ensure members would never again suffer such unexpected pension losses.

"The new laws meant that Members were led to believe no one could lose their pensions in future when their employer failed. This turns out not to be true," said Dr Altmann.

Members of the G&H scheme, whose company had been paying all scheme contributions and levies to the Pension Fund as required, have suddenly found they have no actual protection because of a legal technicality. The PPF has refused to cover their pension losses following the failure of the sponsor. In fact, the PPF has merely offered to return the PPF levy payments to the trustees, leaving the scheme members high and dry. The scheme does not have enough money to meet its commitments to pensioners or those not yet retired. Trustees and Members are devastated.

"How can this be happening after all the pain, suffering and fighting of recent years," said Dr Altmann, who added that the pensioners face losing half their pensions.

She explained that the problem appears to be caused by the legal definition of the word 'employer' under the terms of the PPF legislation. Although the sponsoring employer has been paying contributions to the scheme, all scheme expenses and the PPF levy, it turns out the law does not consider it to be a 'statutory' employer under the required legal definition.

"This loophole must be closed and closed now before more schemes suffer the same fate. Thousands of people could potentially be exposed to it," she said.

The scheme's lawyer, Fraser Sparks of Squire Sanders Hammonds, believes that the technical problems with the legal definition of the statutory employer could be solved by a legislative amendment to ensure that schemes like G&H are admitted to the PPF. But, so far, the DWP has not come forward with a solution at all.

Dr Altmann, who led the campaign then to rescue at least 140,000 people who found that they had lost some or all of the pensions said she was "shocked and appalled" to discover that many thousands could now face a similar fate. Dr Altmann said anyone with worries should immediately contact Trustees of their pension fund and ask for assurances that the scheme will be covered by the PPF if the employer goes bust.


Dr. Ros Altmann

07799 404747


The scheme's lawyer is Fraser Sparks, of Squire, Sanders, Hammonds - 0207 655 1222

The scheme actuary is Richard Tewkesbury, of BDO - 0207 893 2655

1. The G&H scheme was taken over by Zejwa Ltd in 2002. At the time the scheme was already closed, but the company did not want to just wind it up (which it could legally have done at little or no cost at that time) because this would have left non-pensioner members without their pensions. So the company's management decided to support the scheme, which it has done over the past years. It paid levies to the PPF each year and everyone assumed that the members were protected.

2. Unfortunately, during the recession, Zejwa Ltd hit hard times and went into insolvency last year. The Trustees of the pension scheme duly applied to the PPF and members believed their pensions were under its protection. Completely unexpectedly, the Trustees have received notification from the PPF that the scheme does not qualify.

3. The reason given is that in 2002, the scheme was already closed and no members have accrued extra benefits since that time. This means that although the employer responsible for the scheme under Trust and tax law is called the 'principal employer', it is not considered under the 2004 Pensions Act as a 'statutory employer' because it has not actually employed any members since it took over responsibility for the scheme.

4. It seems that, because under the terms of the 1995 Pensions Act, there is no Section 75 pension debt due, the PPF cannot accept the scheme. The complexity of our pension system is such that even those drawing up our laws cannot properly achieve their desired aims.

Share this page

Get In Touch

The Saga Group Communications Team only deal with enquiries from the media.

If you're not a journalist, visit our contact us page for a full list of telephone numbers.