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Comment by lacker | Hacker News Reader

I don't quite get why this article sides with the boss. He promised his workers a certain amount of money through a pension, and now he's having trouble living up to that promise. I wouldn't say it's "being a good guy boss" that is the problem here, it's making financial promises that he wasn't able to keep.

The article also acts like changing to a different accounting system in order to get a different result would be the perfect solution. Well, that's how you get underfunded pensions in the first place.

I think the error was in making these pension promises in the first place. It is far better to make promises that you understand how to keep, like the defined contribution of a 401k, than to make promises to your employees that are implicitly assuming a certain rate of investment return for decades.

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It sounds like you haven't read the article at all.

He has been paying into a scheme for many decades, even though there was no requirement for him to do so. Then as a result of literal theft from a pension scheme, a law was introduced that established a minimum funding requirement on pension schemes, even ones which have been running like this one - for 40 years and completely solvent, meaning that the fund is able to pay out the promised money. No promises were ever broken here. But because the law made an unrealistic minimum funding requirement(probably based on the number of years * some amount) this scheme is now suddenly magically underfunded and he is personally liable to pull £1.2M out of his ass. This doesn't make any sense. He has never lied to anyone, never done something that he shouldn't have, all the promises that he made can and will be kept - but the law fucked him over for literally no reason. It's like walking along on a street, happy and healthy, and being hit by a stray bullet - it can mess up your entire life at no fault of your own.

> He has been paying into a scheme for many decades, even though there was no requirement for him to do so.

Yes, that's true, and to his credit. However, the people whom he hired during that time negotiated their salary and chose their place of employment knowing about the pension scheme, so the whole thing is not quite the act of pure, disinterested benevolence the article makes it out to be.

The hinge point of the story isn't the setting up, administering, payments regarding, or any of the normal expected activity involved.

It is entirely about the arbitrary boundary change in 2005 that created legal debt out of thin air.

And incidentally about the soggy rotten mess that British politics seems to be at the moment, blocking any reasonable effort to adjust the law to a more reasonable funding requirement.

Benevolence or 'selling feature' is irrelevant to the legal blundering.

His employees negotiated their pay decades before the law changed.

are you suggesting company should never pay pension and instead pay their employee directly?

I did read the article, I just don't agree with their emotional take on it.

Basically, I don't agree that this pension fund is solvent. The minimum funding requirements exist for a reason, because underfunded pension funds are probably going to blow up at some point.

What happened is, he promised a certain pension to his employees. Then, he put his money in a pension scheme that actually wasn't charging enough. Now, years later, once some sane accounting rules are put in place, it turns out that there isn't enough money to live up to the promises that were made. It sucks that a decision like this would make a business go bankrupt, but that's what happens when you make financial commitments that you can't afford to pay.

> What happened is, he promised a certain pension to his employees.

No, he promised to pay a certain amount into an established scheme. Then he did so. He's upheld his side of every agreement he's been party to.

> Then, he put his money in a pension scheme that actually wasn't charging enough.

Enough for what?

> Now, years later, once some sane accounting rules are put in place, it turns out that there isn't enough money to live up to the promises that were made.

What promises? Why do you think they can't be met?

> It sucks that a decision like this would make a business go bankrupt

There is no business involved here any more. It's just an individual person who once employed people.

> but that's what happens when you make financial commitments that you can't afford to pay

He didn't make any such commitments. They were conjured out of the air by a legal change that rewrote the terms of his pension contributions retroactively.

He promised to pay a certain amount into an established scheme.

That is typically not the case with pensions. That is the whole problem here! With a pension, you promise your employees they will get a certain amount of money in retirement. With an American 401k, you promise your employees that you will contribute a certain amount of money to an investment that they control.

So when a pension plan runs out of money, that means an employer is reneging on promises they made to their employees.

> With a pension, you promise your employees they will get a certain amount of money in retirement.

No, that's not how it works for most workplace pensions in the UK now that we have a statutory system for them. There are statutorily-specified percentages of the employee's paycheck that get paid into a workplace pension account by the employer - one percentage as a deduction from the employee's paycheck, the other out of employer's pocket on top of the employee's paycheck. Then the employer's duty is done; the money is now in an account controlled by the employee, they're free to move the money to a different provider if they want to, and if they don't and the provider they're using fails, that's not the employer's problem any more.

As I understand it, the agreement the employer and employee had in this case worked in essentially the same way. However, retroactive statutory changes to the rules governing the scheme type had the effect that:

1. The employer retroactively became a guarantor for the liabilities of the scheme 2. The scheme became obligated to have a greater amount of capital on hand to ensure solvency, which the employer was then liable for

This is a "multi-employer" pension scheme. Which means that he is on the hook for the collective shortfall across ALL the employers in the scheme, including much bigger companies that have subsequently gone bankrupt. This is not about him failing to live up to the obligations he made to his own employees. Which should be obvious given that the "shortfall" he is expected to pay seems to be many multiples of the annual turnover for a local plumbing business such as his.

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