IRELAND - The Pensions Ombudsman has admitted the impact of the financial crisis on construction companies is making it harder to get contributions from employers who have failed to pass deductions onto the Construction Workers Pension Scheme (CWPS).
Paul Kenny, the Pensions Ombudsman, told IPE the problem is it is trying to retrieve contributions which were never made when employers were making lots of money, but the financial crisis now means many construction firms are struggling and even becoming insolvent.
This makes Kenny's job harder even though scheme members would be treated as preferential creditors.
That said, he confirmed in "one or two cases" he had made determinations against individual directors of a company because "when [the company is] so small it is difficult to divorce the actions of the company from the directors".
He pointed out the failure to pay deducted pension contributions into the CWPS within 21 days of the end of the month is a criminal offence, so if a director is aware they can be prosecuted too.
The Ombudsman noted if the missing contributions fall within 12 months of the date of insolvency they can be paid by the government through the insolvency fund, but added "it is the older contributions we can't really get at".
In the 2007 annual report published last week, Kenny said: "Every year, with monotonous regularity, I get many complaints from workers in the construction industry about non-payment of contributions to the Construction Workers' Pension Scheme (CWPS). Unfortunately, some of these complaints don't surface until a company is already out of business, possibly in liquidation. This is regrettably becoming more and more common in that industry."
There had been a number of complaints in 2007, he revealed, where mortality benefits could not be paid because the employee was either not registered in the scheme or there was a shortfall in contributions, and when this happens the minimum cost to the employer is €63,500.
Kenny said: "I cannot understand how these employers can be so short-sighted. The eventual cost of being found out is often many times what they think they will save by cheating their employees."
The Ombudsman warned of his willingness to pursue the "hard core " of people who refuse to co-operate, noting in the eight days to 27 November 2008 his office was involved in three court cases.
Of these three cases, one will go to a full hearing on 19 December with the company director currently on bail after failing to appear at an earlier session; one has been adjourned until January, and the third resulted in a criminal conviction and a €2,5000 fine for an employer in Wexford who refused to release payroll records, while the Pensions Board is also "undertaking a major investigation into his company".
"I would appeal to those employers, particularly in the construction industry, not to waste their money trying to delay investigations. They would be far better advised to meet their obligations instead. The record shows that failure to co-operate with my Office will not make us go away and will result in fairly swift court proceedings," said Kenny.
He also highlighted a problem with annual and monthly maintenance, or policy, fees on pensions belonging to members who have left a company, as he pointed out these charges are generally a flat rate fee levied on a monthly basis against the premium, yet "when the person leaves service, they continue to charge these fees".
In addition, Kenny said the fees are generally paid by cashing in units of the fund, but as prices are falling it means more units need to be cashed in, which is an issue for smaller funds as the flat rate takes a higher percentage of the pension pot for "those that can least afford it".
He continued: "I don't see what the benefits of these [schemes] are, as members do not receive monthly statements. I think they are sneaky and nasty little things. I would like to see the financial regulator to make them absolutely illegal."
Kenny added he had drawn the issue to the attention of the regulator recently, and suggested as "everyone is doing it, I imagine they will look at it quite closely and if they find it is widespread they could move against it."
If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email email@example.com