The Government says workers’ pension protection rights are “in doubt” after the Supreme Court ruled against the DWP in a case which will force it to write new legislation.
The case arose following the wind-up of the Imperial Home Décor scheme, a defined benefit and defined contribution ‘hybrid’ pension scheme which qualified for help from the Financial Assistance Scheme.
The DWP intervened in the case because of possible ramifications around the legal definition of ‘money purchase benefits’. Government legislation currently states that money purchase schemes do no qualify for help from the Pension Protection Fund and the Financial Assistance Scheme.
The Supreme Court has ruled against the DWP, which argued that money purchase schemes could not have a deficit. As a result, legislation will need to be amended retrospectively so members’ of money purchase schemes with deficits are protected.
A DWP spokeswoman says: “It is clear that the judgment will result in some schemes being regarded as providing money purchase benefits under the current legislation, even if it is possible for funding deficits to arise in respect of those benefits.
“This will place some schemes outside the scope of a wide range of legislation, including that governing scheme funding, employer debt, the Pension Protection Fund and the Financial Assistance Scheme.
“We therefore intend to introduce legislation with retrospective effect in order to provide certainty and to ensure appropriate protection for scheme members’ benefits and compliance with our obligations under European law.
“Workers who hitherto thought their rights were protected have been put in doubt by a ruling of the Supreme Court.”
Bridge Trustees represented the Imperial Décor pension scheme in the case.
Bridge Trustees chairman Giles Orton says: “The DWP has argued that a scheme should only be treated as money purchase if it can’t have a deficit, and that is how they’ve drafted all their legislation. So things like the PPF wouldn’t apply to money purchase schemes.
“But the Supreme Court has ruled that you can have benefits that are money purchase but still have deficits.
“The DWP needs to be careful when it writes the new legislation. This problem arose because they got the legislation wrong in the first place.”