Tayside plumbers are leading the battle against crippling debt notices issued to business owners across the UK.
Plumbers throughout Britain have been hit with bills by Plumbing Pensions UK Limited (PPUK) as it looks to recover orphan debts to pay the pensions of plumbers whose employers had been in a pension plan which then closed for future accrual.
Affected businesses and retired plumbers have been hit with potentially crippling “Section 75” debt notices, some of which amount to more than £1m.
The eye-watering bills are legally issued but business owners across the country feel it is unfair they should have to bail out PPUK, particularly as many were advised to join the scheme through being members of the industry body Snipef.
Perthshire plumber Fraser Lawrence unknowingly triggered liability for the payments when he upgraded his business from a partnership to a limited company in 2011.
After hearing about the potential to be charged catastrophic bills, he has to pay around £7,000 for comprehensive legal advice to protect his home and savings.
In order to help plumbers across the UK, he and others launched the Plumbing Employers Action Group (PEAG).
He said: “In 2005, the government changed the law on pension schemes. PPUK should have informed us what was going on but we were not told about this until 2016.
“In 2011, we became a limited liability partnership, which was fine until 2016, when most companies involved got a letter from PPUK, stating you could be liable for these orphan debts.
“It’s all coming to light now that PPUK is wanting millions of pounds of what’s known as orphan debt, for companies which have gone out of business.
“It’s known as a ‘last man standing scheme’ so the last business left in PPUK would be responsible for all the remaining debt.”
Mr Lawrence began his campaign against the extortionate bills by rounding up as many plumbers across the country to set up PEAG, tracking down more than a dozen across Tayside and Fife.
PEAG have taken their fight to Westminster and are now calling on significant legislative changes to protect plumbers across the country after an Inverness businessman was hit with a £1.2m bill by PPUK in October.
With enormous debt now tied to his company, Fraser’s business is “unsellable” and he will have to close it when he wants to retire.
Auchterarder plumber Ray Smith, who does not have the same legal cover, fears if he dies, his family will be liable for the debts.
He said: “As a sole trader, l’m personally liable for the debt. The only way out of paying this debt is to become insolvent, but if I die solvent, my family could be liable.
“We need legislative changes to stop this now. My estimated debt to PPUK is around £130,000, but this is only going to be rising.
“There is no debt due by any employer, all pension contributions are paid up to date and the scheme is fully funded.”
PEAG spokesperson Garry Forster added: “It cannot have been the intent of Parliament to bankrupt ordinary people nor render their businesses worthless when all they have done is the right thing in enrolling their employees in this pension scheme.”
Industry bodies lobbying for change
Plumbing Pensions UK and Snipef said they are also lobbying for legislative change to protect their subscribers.
They say it was never intended to push members into the corner in which many find themselves and insist they want to see the law changed.
Chief executive Kate Yates said: “Section 75 and is applied to multi-employer schemes like this all over the UK. The plumbers in the scheme are not connected with each other.
“In the past, some companies tried to walk away from schemes, so an exit charge was applied by the UK government in 1997. The calculation for this was quite straightforward.
“In 2005, the calculations were changed and there are real problems. One of these is orphan liability, which didn’t need to be paid in the past. The law says that now, subscribers must contribute towards paying this.”
Ms Yates explained believes the bills now plaguing plumbers are an “unintended consequence” of the legislative adjustments 14 years ago.
“We’ve been lobbying for the government to change the law. It isn’t fair for the subscribers, many of whom are small family-run firms who have always tried to do the right thing.
“Now, they’re at risk of losing out but the government is wary of changing the law for plumbers in case it affects other schemes.”
Snipef insists it is also battling to alter the law.
CEO Fiona Hodgson said: “Snipef is concerned about the potential impact on our members of the liabilities arising from the Industry Pension Scheme. We have been working with a pensions lawyer to provide clarity around the potential impact on our affected members.
“Snipef provides regular communications to ensure affected Snipef members understand the complexity of the situation and the legislative easements that may be available to them. However, we strongly urge all affected employers to seek professional advice regarding their individual circumstances.
“PEAG is a separate organisation to Snipef. Snipef is concerned about the impact of the punitive legislation on our members, and affected employers across the industry, and have regular dialogue with PEAG on our mutual concerns.”
Ms Hodgson added: “Snipef has been proactively working with MPs, MSPs and members of legislative assembly, lobbying government to change the section 75 legislation and limit the consequences of applying it to a pension scheme of this nature, and to the wide variety of employers that participate in the pension scheme.
“We are disappointed that government has failed to take action and make amendments to address the unintended consequences of the legislation and protect those personally affected.”