UK – John McCall, chairman of the Alumasc Group, has called on the authorities to allow the costs of its defined benefit scheme to be passed on to its former employees, although tax issues have scuppered previous attempts to broker such a deal.

The two closed Alumasc pension schemes have 85% of its few thousand members no longer working for the company. But with increased costs piling up due to lower inflation, regulation and increased longevity, McCall said the burden should be spread to its ex-employees’ new companies.

Across the manufacturing sector in general, only 3.4m still remain, half the number of 25 years earlier. Although the majority have found work in other industries the costs of the defined benefit schemes have remained with the sunset industry.

McCall said: “It is a bit of a nightmare. Our company is not untypical of the sector in general, which has shrunk and often closed pension funds to new members. New legislation has affected our flexibility and there are often no new members for contributions.

"This is a strange, unforeseen problem that successful business, such as ours, are paying for other employees’ benefits, which is a millstone for us and reduces our competitiveness. There should be a way to transfer costs to our ex-employees’ new companies, as if they had remained our workers we could have asked for higher contributions.”

But the National Association of Pension Funds was less than hopeful. “We sympathise with him and others in his position. Unfortunately this is how the system is set up. The issues involved are manifold and complicated.”

The basic difficulty has been the Inland Revenue’s refusal to allow firms to effectively cross-subsidise other firms and a recent multi-company task force on the pensions foundered on this point.

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