Westminster urged to take action on pensions for off-shore sector


  By Wendy Steele
A Holyrood debate on the oil and gas sector has highlighted concerns that off-shore operators face a race for compliance with new pension rules.
A new ruling connected to the introduction of automatic enrolment into pension schemes means that there is a legal obligation upon employers to opt their employees into a formal pension scheme.

This obligation phases in from January 2013.

Due to the nature of reliance on foreign contractors in the sector, Holyrood has tasked the Westminster Parliament with recognising the unique circumstances as well as the difficulties they create with the ruling and is urging Westminster to hasten measures to speedily comply with changes.

Failure to comply with this legal obligation means that energy companies based in Scotland could attract penalties reaching £10,000 per day under the new pension rules being implemented over the coming months.  Obligatory changes to the pension scheme will require rapid implementation.

International law firm, Pinsent Masons which lists energy and utilities as part of its broad company portfolio, warned that given the nature of the gas and oil sector’s workforce, the industry faces strong challenges for employers to adapt to automatic enrolment of employees in pension schemes.

The nature of the oil and gas industry means a reliance on ‘rotators’ who are overseas contractors brought into the UK oilfields often on short-term assignments.  The sector supports 440,000 jobs in the UK with 45% of those in Scotland.

It is believed that, from January 2013, businesses with 30,000-50,000 employees will be expected to comply with the new regulations, with companies upwards of 800 employees required to comply by October of this year.  Legal experts in the gas and petroleum finance have warned that failing to prepare early, could put employers at a disadvantage in negotiations with pension providers.

Mark Baker, a Pensions expert at Pinsent Masons, warns that although the:

“The government recognised the issues relating to the enrolment of offshore workers and has gone a long way towards sorting these out … However, there are still big question marks over the treatment of employees who are brought into the UK from other countries on short to medium term assignments, and expats and ‘rotators’ who are sent overseas from the UK.

“Whether they need to be auto-enrolled depends on the nature of their assignment, which is a difficult practical problem for oil and gas operators.”

“There are also issues around contractors and whether they are truly self-employed or have employment law rights which means they too would need to be auto-enrolled too”.

Urgent clarification has been sought by SNP MSP Maureen Watt who has written to the Minister for Pensions at Westminster, asking what consideration and support it has given to the oil & gas sector in relation to this measure. 

She stresses the need for the London based government to recognise the importance of compliance with the new measures and urged Westminster to make speedy clarification on the steps they are taking to help the oil and gas sector.

Commenting, Ms Watt said:

“The oil & gas industry is a sector like no other, but its unique working practices mean that it may face far greater challenges than other businesses would in adapting to changes to pension schemes.

“It is important that these particular challenges are being recognised by the Westminster Government, so that oil & gas companies are fully supported in the process of moving to automatically enrolling employees in pension schemes.

“Scotland’s oil & gas sector is home to world-class expertise which is in much demand internationally and it is critical that the ability to successfully market that expertise around the world is not interrupted.

“The oil & gas sector is one of the brightest spots in Scotland’s economy, so it is essential that potential obstacles to its future success are successfully avoided.”

With industry insiders and experts fully aware of the need for haste in smooth implementation of this legislation, the hope is that the Pensions Regulator will recognise the unique circumstances of a major cog of Scotland’s economy.