43% rise in cases sent to pensions watchdog

COMPLAINTS MADE to pensions ombudsman Paul Kenny surged 43 per cent last year, with a near trebling of the number of cases involving the failure of construction firms to invest employees’ pension contributions.

Mr Kenny said yesterday he had received 101 cases alleging that construction firms had deducted pension contributions from staff but not passed them on to a pensions company to invest. This compares to 35 similar complaints in 2007.

Further complaints in relation to construction companies are expected, as Mr Kenny said he believed the increase in cases was because employees usually only discovered that something was amiss with their pension scheme when they left their job.

“I greatly fear it will increase as more and more of those firms are ceasing to trade,” he said.

The 101 cases include “four or five” widows who are owed mortality benefits under the rules of the Construction Industry Pension Scheme.

Construction workers who discover that their pension deductions have not been paid into a scheme while they are still employed, are often “afraid to put their heads above the parapet”, according to Mr Kenny.

But the collapse of the housing market has prompted tens of thousands of layoffs and “now that they’ve lost their job, they’re not afraid to make a complaint,” he said.

There was also some evidence of eastern European ex-construction workers wrapping up their financial affairs before leaving the country, he added.

The pensions ombudsman only deals with complaints relating to the construction scheme that cannot be resolved by the Construction Industry Monitoring Agency (Cima), which looks at allegations of non-remittance that relate to the previous three years.

Mr Kenny said his caseload dated back to 2003.

Overall, Mr Kenny received 737 new complaints in 2008 compared to 515 in 2007. In addition, 354 cases were carried forward from 2007, giving a total of 1,091 for the year. With 643 cases finalised in 2008, the number of cases carrying into this year is 448, a rise of 27 per cent.

Mr Kenny, whose office was established in 2003 and now employs 10 people, warned companies not to regard pension deductions as a source of temporary cash flow during the downturn.

“These deductions are not, and must never be regarded by a company as part of their funding arrangements,” he added.