December 3, 2010 3:45 am

PPF turns down G&H pension scheme

Members of a UK company pension scheme have been left without a safety net after their employer became insolvent and trustees learned that a technical flaw in the current law means the scheme cannot be rescued by the Pension Protection Fund.

Ros Altmann, director general of Saga, who as an independent pensions advisor pushed for the creation of the PPF, said she had been contacted by trustees of what had been the G&H Pension Scheme after it was turned down for admission to the PPF.


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The scheme, which has roughly 40 members and a shortfall on PPF-insured benefits of around £1m ($1.5m), had been paying regular insurance premiums to the PPF since these were first required to be paid in 2006. “All it offered them was a refund of premiums,” Ms Altmann said.

Pensions lawyers said that the problem was not unique and that other small schemes have been captured by the same legal flaw.

“It comes down to who is the sponsoring employer,” said Jane Samsworth, partner in the pensions practice at law firm Hogan Lovells. “It has to be an employer who actually employed members of the pension scheme.”

Ms Altmann said that is precisely the issue for the scheme, which was the retirement plan of a construction firm, George and Harding Ltd, which transferred assets and liabilities from a multi-employer scheme in 1992 and set up its own plan. The scheme was closed in 1996 and the company ceased trading in 2002. However, a new company acquired it and although it would have been legal to abandon the scheme with only a modest sum in it, the new employer, Zejwa, agreed to continue payments to the plan.

But in 2009, Zejwa encountered financial difficulties and is now in liquidation. Because it never employed any of those whose pensions are being paid, its insolvency does not trigger admission to the PPF.

A PPF spokesman said Ms Altmann is right to raise the point, but that the flaw is in the law, not the way it is administered. “We have absolute sympathy for the members,” the spokesman said. “We just implement the rules. We cannot bend the rules.”

The Department for Work and Pensions said through a spokesman on Thursday that the flaw is “an operational matter for the PPF.”

“However if there is a gap in the legislation that is a matter for the DWP. We will act if schemes are not protected appropriately,” the spokesman said.

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