UK - A UK pension scheme has been refused entry to the Pension Protection Fund (PPF), revealing what one industry figure called a "serious flaw" in pensions law.

Ros Altman, director general at the Saga Group, said the recent rejection of the pension scheme for former construction firm George and Harding (G&H) showed errors in the way 'employers' have been defined.

Caroline Legg, an associate at Sackers, said the entry requirements for schemes were prescriptive and inflexible.

"I've known a couple of near-misses, and it was only a question of time before we saw a scheme rejected at the first hurdle," she said.

She said trustees must be aware of all PPF entry requirements at all times, especially if an employer change is involved.

"The trustees of the G&H scheme will need to assess what options are available to them now, including whether there are any grounds for appeal or review of the decision, in order to try and avoid the perils of winding-up outside of the PPF," she said.

The company pension scheme, with £2m in assets, was already closed when G&H was bought out by Zejwa in 2002.

This meant the sponsoring employer was not considered the same as the principal employer when Zejwa went into liquidation, despite paying levies to the protection fund since its inception.

A spokesman for the PPF said he was unsure if this was the first time a scheme was rejected on such grounds.

He added: "This is very much an issue related to the legislation. Our job is to implement the rules as they are.

"Ros Altman is absolutely right to highlight the issues with the legislation, and it is now up to Department of Work and Pensions ministers to take action."

A DWP spokeswoman said gaps in legislation were a matter for the department and that it would act if schemes were not protected appropriately.