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This article is about a group pension plan and a legally mandated way of calculating liabilities that isn't working in a particular case. It's a simple law chan

This article is about a group pension plan and a legally mandated way of calculating liabilities that isn't working in a particular case. It's a simple law change. It's not some crazy bureaucratic maze or malevolent government - it's actually a private pension administrator, and it is based on a strict way of calculating future liabilities for group plans being applied to individual members when they leave the group in a fairly dumb way. The law in question came around for a good reason: Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s. Following the media tycoon's death it emerged he had plundered millions from the Mirror Group pension scheme. The Pensions Act 1995 introduced a series of reforms including a "minimum funding requirement" for pension funds. It also introduced something called "Section 75 pension debt", which meant if an employer "departed" a scheme, they could still be pursued for any shortfall. It is just a poor match with this type of shared pension scheme (not British, so forgive problems matching this to other types of defined benefits plans I'm more familiar with). This seems to be a clear case to revise this Section 75 for these types of group plans/schemes. There is no actual fiscal problem here, just a legal one. The biggest obstacle to amending the existing law, based on the article, is an inability to enact legislation because of distraction by Brexit.

jermaustin1 7y ago
It seems like the governments officials overseeing the scheme don't see anything wrong with Section 75: > The Department for Work and Pensions spokesman said the rules were in place to ensure schemes were adequately funded. > He said: "We have a duty to protect members in their retirement, ensure schemes are properly funded and work with those employers who remain in a multi-employer scheme. It seems like a giant clusterf*ck was introduced in 2005. 1. It wasn't properly communicated to anyone 2. There was a loophole that allowed a company to exit the pension for £1 3. The remaining businesses to cover the share of the deficit for everyone who had exited the scheme. 4. Most of these businesses didn't learn of the deficit until 2016, a decade after the the new math went into effect. If the pension didn't do their duty to warn businesses of the deficit in 2005, it should be on their heads to fund the deficit, and they should not be allowed to pull from the pension fund, they have to pull from their own money. Had these businesses known 10 years ago, they could have been paying all along an increased pension rate for their employees.
- rtkwe 7y ago
  > and they should not be allowed to pull from the pension fund, they have to pull from their own money. What's the pension's own money here? Everything they manage should nominally be part of the fund owed to their retirees. Where do you propose they actually draw money from?
  - jermaustin1 7y ago
    Their management fees. They aren't running a charity, they collect from the $1000 pension fund a 1-2% management fee (if similar to US 401k administrators). And if they don't have enough cash to add back into the fund, they need to take on debt to fund THEIR shortfall. The businesses were not told to increase their funding obligation from the start, so they should be off the hook.
    - undecisive 7y ago
      You are right, in a way. If they can't service the debts themselves, and they can't take out a loan to cover it, they have to go bankrupt. In reality, the pension provider probably should declare bankrupcy. In theory, FSCS / PPF should kick in and most people should still get some kind of pension out of it - albeit a lot less than they expected. However... I don't know much about the bankrupcy procedure. Would administrators have to be called in? Would they then chase these customers anyway? I don't see any way out of this cock-up of a law without the law itself being changed. It's bonkers. [UPDATE] Actually, it turns out that's almost exactly what they've done https://www.plumbingpensions.co.uk/plumbing-pensions-to-close-on-30-june-2019-2/ https://www.plumbingpensions.co.uk/plumbing-pensions-to-clos... By closing their doors and handing the pension pots on to other providers, anybody still a member is completely safe. The problem is, the guy in the original post stopped being a member, which is what has triggered the legal problems. If you want to see the government position on this, it's here: https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7684 https://researchbriefings.parliament.uk/ResearchBriefing/Sum... ... and they aren't willing to do anything about it, for fear that people might use any fallout mitigation to walk away from being responsible employers.
Bartweiss 7y ago
I'd argue that it is a crazy bureaucratic maze, but we agree on the specifics of the change. Shared liability was a fairly simple way for small employers to keep their workers taken care of even if specific businesses failed. Its existence, along with the existence of unincorporated business owners, was missed or ignored when Section 75 was put into place. And the oversight wasn't corrected in 2005 when the rules were revised. More damningly, the rules were revised seemingly without consideration for the difficulty of back-filling forty years of contributions to an entirely new threshold. Section 75 came about because of outright theft, and was revised in response to employers promising pensions out of line with what they were actually investing, but it wasn't targeted towards those cases. Instead, it created a liability for employers who'd been adequately funding pension schemes for decades, based on a calculation they'd never planned to support. And if the pension funds don't play along, they incur fines which could actually make healthy funds insolvent! So a change aimed at addressing theft from pensions has created a situation where either employers are bankrupted for offering pensions to employees, or healthy, honest pension funds become unable to pay full benefits. I won't allege malice, but it's fairly spectacular incompetence to write a law supporting pensions which actually endangers people's pensions.
- throwaway5752 7y ago
  I agree! Closing loopholes to prevent theft was good. Implementation was lacking. They should fix this and stop good people like the subject of this article from suffering.
dmix 7y ago
> Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s. > It's not some crazy bureaucratic maze or malevolent government hmm Policy designed for big firms, and in reaction to a few bad billionaire's or hundred millionaire's actions, which then destroys or squeezing out the small companies is one of the most common complaints against regulations like this. It's how you end up with only mega-corps and no competition or upward mobility for the middle class, and everyone wondering why there's a wealth gap when your only option is to work at bigco. This stuff always starts out with good intentions like "punishing the rich". And then some nobody middle-class plumber in Scotland is the one being forced to sell his house while Maxwell's family trust is still worth millions. Meanwhile law changes are never a 'simple fix', these sorts of things stick around for decades. Edit: note Robert Maxwell was the billionaire(?) father of Ghislaine Maxwell who was Epstein's second-in-command in the sex ring
- commandlinefan 7y ago
  > law changes are never a 'simple fix' The article’s completely baseless tie-in to Brexit illustrates this: “Hey, man, I’d love to fix your problem, but those xenophobic bigots voted on something completely unrelated, so there’s nothing I can do…”
  - iamflimflam1 7y ago
    There’s nothing they can do because all the legislative time is being taken up by trying to do something impossible.
- throwaway5752 7y ago
  Yes, financial regulation is hard. People are always trying to game it. Unfortunately there are really good reasons to avoid ex post facto laws. So you have the cat and mouse game where people find a loophole, exploit it, and it gets fixed. It gives the appearance of people "getting away with it". Overall the system works, and - almost by definition - you just hear about the exceptions. The solution isn't to give up.
2ion 7y ago
> . It's not some crazy bureaucratic maze or malevolent government It is. Because as one 71-year old individual, former plumber, one day the regulators come knocking on your door telling you you're 1.2m short. In this kind of situation, an individual with no political or instiutional connections is (perceivedly) powerless and overwhelmed: - I can't pay my responsibilities. - I can't change the law. That's kafkaesque.
- justin66 7y ago
  > That's kafkaesque. You can't really use that term to describe a situation that is well understood and is widely recognized to be a problem (not exactly a Kafka staple). It's simply awful law, which is bad enough. You'd expect lawmakers to just fix it, although they tend to be preoccupied with other things in the UK right now.
  - logfromblammo 7y ago
    Kafkaesque would be... - I don't know what my responsibilities are. - I don't know to whom I am obligated. - I cannot discover either. - I am being punished for failure to deliver. - Everything I can possibly do is not enough. - Every 4 weeks, men in grey, face-concealing masks sedate me and graft what is possibly the upper half of a deformed baby onto my back. They cry constantly. I am not allowed to have mirrors. It has been 18 months, and I can barely lift the weight of them any more.
    - bequestry 7y ago
      Hmm sounds like my current devops position, especially that last one
      - Zenst 7y ago
        Sounds like your company needs some ISO 9001 love. Though with such chaos, your position is less likely to become automated ;).
canada_dry 7y ago
I'm assuming that the 'Plumbing Pensions scheme' is a defined benefit plan - vs. defined contribution. Otherwise, this absolutely makes no sense.
- twic 7y ago
  Seems so (my emphasis): > The Plumbing and Mechanical Services (UK) Industry Pension Scheme was set up in 1975 with the aim of providing pension benefits for all employees of firms engaged in the Industry in the United Kingdom. The Scheme offered deferred benefits based on career average earnings. https://www.plumbingpensions.co.uk/about-us/about-us/ https://www.plumbingpensions.co.uk/about-us/about-us/

jermaustin1 7y ago

It seems like the governments officials overseeing the scheme don't see anything wrong with Section 75: > The Department for Work and Pensions spokesman said the rules were in place to ensure schemes were adequately funded. > He said: "We have a duty to protect members in their retirement, ensure schemes are properly funded and work with those employers who remain in a multi-employer scheme. It seems like a giant clusterf*ck was introduced in 2005. 1. It wasn't properly communicated to anyone 2. There was a loophole that allowed a company to exit the pension for £1 3. The remaining businesses to cover the share of the deficit for everyone who had exited the scheme. 4. Most of these businesses didn't learn of the deficit until 2016, a decade after the the new math went into effect. If the pension didn't do their duty to warn businesses of the deficit in 2005, it should be on their heads to fund the deficit, and they should not be allowed to pull from the pension fund, they have to pull from their own money. Had these businesses known 10 years ago, they could have been paying all along an increased pension rate for their employees.

rtkwe 7y ago
> and they should not be allowed to pull from the pension fund, they have to pull from their own money. What's the pension's own money here? Everything they manage should nominally be part of the fund owed to their retirees. Where do you propose they actually draw money from?
- jermaustin1 7y ago
  Their management fees. They aren't running a charity, they collect from the $1000 pension fund a 1-2% management fee (if similar to US 401k administrators). And if they don't have enough cash to add back into the fund, they need to take on debt to fund THEIR shortfall. The businesses were not told to increase their funding obligation from the start, so they should be off the hook.
  - undecisive 7y ago
    You are right, in a way. If they can't service the debts themselves, and they can't take out a loan to cover it, they have to go bankrupt. In reality, the pension provider probably should declare bankrupcy. In theory, FSCS / PPF should kick in and most people should still get some kind of pension out of it - albeit a lot less than they expected. However... I don't know much about the bankrupcy procedure. Would administrators have to be called in? Would they then chase these customers anyway? I don't see any way out of this cock-up of a law without the law itself being changed. It's bonkers. [UPDATE] Actually, it turns out that's almost exactly what they've done https://www.plumbingpensions.co.uk/plumbing-pensions-to-close-on-30-june-2019-2/ https://www.plumbingpensions.co.uk/plumbing-pensions-to-clos... By closing their doors and handing the pension pots on to other providers, anybody still a member is completely safe. The problem is, the guy in the original post stopped being a member, which is what has triggered the legal problems. If you want to see the government position on this, it's here: https://researchbriefings.parliament.uk/ResearchBriefing/Summary/CBP-7684 https://researchbriefings.parliament.uk/ResearchBriefing/Sum... ... and they aren't willing to do anything about it, for fear that people might use any fallout mitigation to walk away from being responsible employers.

Bartweiss 7y ago

I'd argue that it is a crazy bureaucratic maze, but we agree on the specifics of the change. Shared liability was a fairly simple way for small employers to keep their workers taken care of even if specific businesses failed. Its existence, along with the existence of unincorporated business owners, was missed or ignored when Section 75 was put into place. And the oversight wasn't corrected in 2005 when the rules were revised. More damningly, the rules were revised seemingly without consideration for the difficulty of back-filling forty years of contributions to an entirely new threshold. Section 75 came about because of outright theft, and was revised in response to employers promising pensions out of line with what they were actually investing, but it wasn't targeted towards those cases. Instead, it created a liability for employers who'd been adequately funding pension schemes for decades, based on a calculation they'd never planned to support. And if the pension funds don't play along, they incur fines which could actually make healthy funds insolvent! So a change aimed at addressing theft from pensions has created a situation where either employers are bankrupted for offering pensions to employees, or healthy, honest pension funds become unable to pay full benefits. I won't allege malice, but it's fairly spectacular incompetence to write a law supporting pensions which actually endangers people's pensions.

throwaway5752 7y ago
I agree! Closing loopholes to prevent theft was good. Implementation was lacking. They should fix this and stop good people like the subject of this article from suffering.

dmix 7y ago

> Section 75 came about as a result of a sweeping review of pension regulation in the wake of the Robert Maxwell scandal in the 1990s. > It's not some crazy bureaucratic maze or malevolent government hmm Policy designed for big firms, and in reaction to a few bad billionaire's or hundred millionaire's actions, which then destroys or squeezing out the small companies is one of the most common complaints against regulations like this. It's how you end up with only mega-corps and no competition or upward mobility for the middle class, and everyone wondering why there's a wealth gap when your only option is to work at bigco. This stuff always starts out with good intentions like "punishing the rich". And then some nobody middle-class plumber in Scotland is the one being forced to sell his house while Maxwell's family trust is still worth millions. Meanwhile law changes are never a 'simple fix', these sorts of things stick around for decades. Edit: note Robert Maxwell was the billionaire(?) father of Ghislaine Maxwell who was Epstein's second-in-command in the sex ring

commandlinefan 7y ago
> law changes are never a 'simple fix' The article’s completely baseless tie-in to Brexit illustrates this: “Hey, man, I’d love to fix your problem, but those xenophobic bigots voted on something completely unrelated, so there’s nothing I can do…”
- iamflimflam1 7y ago
  There’s nothing they can do because all the legislative time is being taken up by trying to do something impossible.
throwaway5752 7y ago
Yes, financial regulation is hard. People are always trying to game it. Unfortunately there are really good reasons to avoid ex post facto laws. So you have the cat and mouse game where people find a loophole, exploit it, and it gets fixed. It gives the appearance of people "getting away with it". Overall the system works, and - almost by definition - you just hear about the exceptions. The solution isn't to give up.

2ion 7y ago

> . It's not some crazy bureaucratic maze or malevolent government It is. Because as one 71-year old individual, former plumber, one day the regulators come knocking on your door telling you you're 1.2m short. In this kind of situation, an individual with no political or instiutional connections is (perceivedly) powerless and overwhelmed: - I can't pay my responsibilities. - I can't change the law. That's kafkaesque.

justin66 7y ago
> That's kafkaesque. You can't really use that term to describe a situation that is well understood and is widely recognized to be a problem (not exactly a Kafka staple). It's simply awful law, which is bad enough. You'd expect lawmakers to just fix it, although they tend to be preoccupied with other things in the UK right now.
- logfromblammo 7y ago
  Kafkaesque would be... - I don't know what my responsibilities are. - I don't know to whom I am obligated. - I cannot discover either. - I am being punished for failure to deliver. - Everything I can possibly do is not enough. - Every 4 weeks, men in grey, face-concealing masks sedate me and graft what is possibly the upper half of a deformed baby onto my back. They cry constantly. I am not allowed to have mirrors. It has been 18 months, and I can barely lift the weight of them any more.
  - bequestry 7y ago
    Hmm sounds like my current devops position, especially that last one
    - Zenst 7y ago
      Sounds like your company needs some ISO 9001 love. Though with such chaos, your position is less likely to become automated ;).

canada_dry 7y ago

I'm assuming that the 'Plumbing Pensions scheme' is a defined benefit plan - vs. defined contribution. Otherwise, this absolutely makes no sense.

twic 7y ago
Seems so (my emphasis): > The Plumbing and Mechanical Services (UK) Industry Pension Scheme was set up in 1975 with the aim of providing pension benefits for all employees of firms engaged in the Industry in the United Kingdom. The Scheme offered deferred benefits based on career average earnings. https://www.plumbingpensions.co.uk/about-us/about-us/ https://www.plumbingpensions.co.uk/about-us/about-us/