TPR has published a report setting out its actions to protect members and businesses after a participating employer in the scheme paid out dividends prior to the company's liquidation - money which should have gone towards funding people’s retirements.
The regulatory intervention report details how it took steps to exercise its anti-avoidance powers against Cliden Construction Limited (CCL) resulting in a settlement being reached with a former director of CCL and a related company.
Many DB schemes are better funded than at any point in recent memory, with around 90% of schemes fully funded (on the ‘technical provisions’ basis). However, a small proportion are in deficit.
The multi-employer plumbing industry scheme, which has a deficit of around £258 million, is an industry-wide defined benefit (DB) multi-employer scheme with over 30,000 members. The scheme is sponsored by more than 300 employers.
Participating employers leaving the scheme are required to pay a debt to meet their share of a pension deficit. If an employer fails to pay its debt, the liability is distributed across the remaining employers.
Gaucho Rasmussen, TPR’s Executive Director, Enforcement and Legal Group, said: “Members rely on pensions to provide them with a sustainable income in retirement and employers cannot simply walk away from their responsibilities. While we aim to prevent harms through constructive engagement, we will not hesitate to use our enforcement powers where necessary to secure positive outcomes and as a deterrent against this type of behaviour."
“We will continue to work together with the trustees of the plumbers’ scheme to ensure that employers understand the importance of paying their debts to the scheme and the potential consequences of not doing so.”
CCL triggered a debt under section 75 of the Pensions Act 1995 in early 2019 when it ceased to employ active members of the scheme.
TPR’s investigation found that CCL, alongside connected parties, had taken a series of steps to avoid its section 75 debt. These included issuing dividends effectively removing funds that could have gone into the pension scheme. CCL later entered liquidation in June 2023 with the debt still unpaid.
In response, TPR launched an anti-avoidance investigation culminating in a Warning Notice seeking Contribution Notices against CCL and connected parties.
TPR used a range of its legal powers in the case including compelling witnesses to attend interviews on three occasions to provide information, and fining CCL’s accountants for failing to comply with statutory information requests.
Following the Warning Notice, a settlement was reached with the relevant parties, and funds have now been paid into the scheme.
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