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PPF snubs scheme compensation claim over legal technicality

Saga director-general Ros Altmann is calling on the Government to amend pensions legislation after the Pensions Protection Fund refused to pay compensation to 40 members of a scheme.

Altmann says the G&H pension scheme, which has a £1m deficit on the PPF basis, has made the required annual levy payments to the lifeboat fund. However following the failure of parent company Zejwa, which took over the pension fund in 2002, she claims a problem around the legal definition of the scheme’s “employer” has led to the scheme and its members being rejected for PPF protection.

According to Altmann, the trustees’ application was turned down because in 2002 the scheme was already closed and no members were accruing extra benefits since then. As a result, 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 “sponsoring employer” because it has not actually employed any members since it took responsibility for the scheme.

Altmann says the PPF has offered to repay the levy payments and is “trying to wash its hands” of the situation.

She adds: “We were told that the PPF would ensure members were protected properly in the case of employer insolvency in future. Indeed, members of UK pension schemes have been relying on such protection and they were reassured of this by Government.

“Members of the G&H pension scheme are facing the loss of much of their pension. And there are potentially more, some very large schemes, which could be similarly affected. The assurances of PPF protection have turned out to be false.”

The PPF was unable to comment as its offices are closed.

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. FFS–never let the truth get in the way of a good headline, eh? The PPF isn’t snubbing anyone: as a creature of statute, it would be acting ultra vires if it accepted the claim. It’s not ‘computer says “no”‘; it’s ‘Legislation says “no”‘.

    ‘Journalist Verifies Facts’; now that would be a headline worth investigation.

  2. David Trenner - Intelligent Pensions 2nd December 2010 at 12:09 pm

    Fitz, I agree with you. They have to comply with legislation.

    I wonder why Ros Altmann has got involved in the case. Perhaps she has been misquoted here. The PPF ought to protect members of this scheme, but the legislation does not permit it to do so, so if Ros is proposing a change in legislation that makes sense.

    Otherwise it looks like publicity for Ros/Saga on a ‘no-win’ fight.

  3. David Trenner would not have dared to make such a comment about publicity if like me he had lost 90% of his pension at 59 and without Ros Altmann would not have benefited from FAS however flawed it might still be

  4. David Trenner has obviously not lost his pension otherwise he wouldn’t be making comments like he has. After the Maxwell scandal and the long fight by the Pensions Action Group to change legislation, one would expect it to now give protection. Ros Altmann has long campaigned to make this happen and like G&H scheme members has been let down. It goes to show whatever people say or think pensions are still not safe.

  5. Jacqueline Richardson 3rd December 2010 at 2:40 pm

    David makes a very naive comment. Obviously his knowledge is limited, whereas Ros is an expert. Having dealt with High Courts, The Ombusman, MP’s, The Media and represented thousands who lost there pensions I doubt she seeks publicity, nor Saga who fully understand the travisty.

  6. The attitude of the PPF is the issue here – of course they can only implement the legislation, but if they are faced with a scheme which has paid its levies appropriately, in the full expectation of being covered by the PPF, then when a legal loophole is found, it seems quite unacceptable for PPF to leave the trustees and scheme members in the lurch and merely offer a return of the levies. The PPF should be concerned about the members and also concerned that the cover it was set up to offer is not working in this case. There may well be ways round this, in which case the PPF should offer some guidance or should contact the Pensions Regulator and the DWP to ensure that the legislation is amended if needed. This scheme was rejected many months ago, members are facing the loss of up to half their pension – in fact the pensioners themselves could be about to lose half their pension and this was not supposed to be able to happen any more. The employer and trustees have been contributing in good faith and paid their PPF levies in good faith. They could have walked away from the members of this scheme in 2002 and left them without any further obligations, but chose to try to support the scheme and pay the pensions.
    Having fought for so many years to ensure that pensions in the UK would in future be properly protected, to avoid the kind of devastation that so many people faced prior to the PPF, it is distressing to me to see that the legislation may be flawed and may prevent closed schemes from being covered as expected. As more and more schemes close, there could be more caught by this and all members of even the smallest schemes need protection. I hope that the situation can be resolved quickly, so that the protection that members have been led to believe is in place, is truly there for them.

  7. Ros

    Surely your gripe is with the DWP and not the PPF? I am not sure why it is ‘unacceptable’ for the PPF to apply the law. Yes the PPF should make the DWP aware of problems with the legislation but it does not have the power to put in place interim measures and it cannot second guess what legislative changes might be made. Who were the trustee lawyers?

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