An employer with a small DB scheme gives its evidence to the WPC

Founded 50 years ago, Dixon International Ltd is an award-winning innovator and manufacturer of specialised construction products. It was the first to develop aluminium and elastomeric draught seals for doors & windows in the early sixties. It was the first to launch fire and smoke seals for fire doors worldwide in the seventies. It coined the term “intumescent” and went on to win four Millennium Product Awards from the Design Council for our advances in intumescent technology by international standards.

Its technical strengths have led to our developing bespoke products for clients as diverse as the Thames Barrier, English Heritage and the Channel Tunnel. It intends to innovate into the future to save more lives in fires and to reduce energy costs.

It is  a major R&D programme to bring further advances in fire safety glazing, in fire door seals, in energy efficiency and acoustic protection.

This is its submission to the Work and Pensions Committee

I represent an SME Pension Consultation Group recognised by the PPF & DWP. We have previously submitted evidence to your Committee.


I would like to support the comments made by Con and Iain the other day. I thought the second session was far less informative and steeped in actuarial bias. The sponsor seems incidental although Con mentioned the strain it is putting on SME sponsors of DB schemes. The actuarial demands on my company almost put us out of business and several times pushed us into loss. I would like to make some pertinent points from the sharp end I hope you will consider.


1.              The push towards gilts too soon will only expand the ‘deficit’ (a made-up number and which does not even approximate the lower level of payment obligations – in our case the ‘actuarial deficit’ is around 230% of what we’ll need to pay members.

2.              We are 80% in equities which have yielded over recent years between 5% and 7% pa. Gilts only realise less. Consider the rate of inflation and we’d be going backwards.

3.              There are two problems with the PPF. The first is that whilst they are already fully funded and are reducing levies for small (under £50m) schemes, they cannot stop charging more because of the rule they can only increase the levy by 25%. Twenty-five percent of nothing is nothing. So, it appears they will be obliged to overcharge levy payers. The second is that there is no legal mechanism for the PPF to repay the surplus to levy payers. They should be repaid with interest added.

4.              It is difficult to be sure when DRCs should end and here again the sponsors are penalised. Any repayments of surplus in the scheme can be returned to the sponsor but HMRC charges the sponsor 35% of this. This also is patently unfair. HMRC refunds over tax payments and adds interest by contrast.

5.              Complexity. I can assure you that lay trustees struggle to understand the system. At one trustees’ meeting a member nominated trustee was asked why he was so quiet. He said ‘I’m not as intelligent as you. I understand sines and cosines but not the pension, so I wait to see what others think and vote with them.’ He resigned as a trustee and we cannot find anyone belonging to the scheme to replace him. It’s a bitter chalice. I resigned as a trustee because it is so onerous on time. We are moving into a closed cell consolidated scheme – which will be a relief to us all. The most cautious trustee who has blocked various obvious improvements admitted this was because he didn’t fully understand the system so preferred to be cautious. Since Con has been lending his sage advice, this issue has melted away.

6.              There is a long-term attitude among actuaries that the sponsor is the big bad wolf and should be squeezed to the max. We went through three or four of these before finding an actuary who took a balanced view. One actuary turned to me with a smirk on his face and said, ‘If it were up to me, I’d wind the scheme up and present you with a bill of £11m.’ We turn over £6m pa and have a scheme with just over 100 members. I replied ‘That would send us to the wall, and don’t you care about the half of the members who are still working for us?. ‘Not my concern.’ Was the reply. I was shocked. We have been bullied by actuaries threatening a tPR investigation – and likewise quoting all sorts of statutes/Regs to push us to commission unnecessary reports to line their pockets. It has become an industry which very few fully understand.


The system as it stands is unfit for purpose and has damaged our collective fortunes gratuitously. We have been a zombie manufacturer, existing to serve the pension with nil investment in talent, plant, diversifying etc. It has swallowed countless hours of management time. I calculate around £40k’s worth pa. We only employ 65 people. Thanks to Con’s and other advice, we renegotiated the length of the recovery plan which has eased the pressure, but the system is Carrollian – it is ‘Pensions through the looking glass’. Whatever you and you colleagues on the committee can do to impute some plain common sense into the system would be welcomed by me and by the many other schemes, still left floating in the fog of the unknown.


About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to An employer with a small DB scheme gives its evidence to the WPC

  1. John Mather says:

    Evidence from the heart, but is anyone listening?

  2. Allan Martin says:

    I don’t want to sound unsympathetic to SMEs but can I suggest an additional consideration or two around these deferred pay promises –

    History; (1) Ted Heath, refunds of contributions, (2) Barbara Castle, GMPs and deferred revaluation e.g. 8.5%pa…(3) Norman Fowler (?) anti-franking, (4) John Major 1986-91 non-GMP revaluation, (5) 1995 Pensions Act compulsory pension increases, TMT Boom and bust, Malcolm Wickes 10th May 2003 wind up liability, FCS/PPF, Lehmans, QE, no QT, ….society demands some backing to these promises and a balance of investment risk and reward.

    Arithmetic; Deferred pay payment = mortgage repayment? My building society wasn’t impressed with my suggestion of trebling my mortgage, investing 2/3rds in equities, assuming an extra equity return of 3-4% pa and halving the monthly repayment over a shorter repayment period.

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