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Fight for pension redress goes on despite EU ruling

PPF burden could soar for firms after European Court of Justice decides UK pension compensation is inadequate.

The European Court of Justice has ruled that Government protection for people who lost their pensions when schemes went bust was inadequate but has fallen short of ordering compensation.

The case will now go back to the UK High Court to seek compensation for an estimated 125,000 people who lost out when their occupational schemes were wound up.

The outcome could affect the Pension Protection Fund and potentially raise the burden for UK firms if the Government is forced to scrap its current compensation limit of 90 per cent of lost pensions and £26,000 annual cap on payouts to individuals.

Alexander Forbes Financial Services director of actuarial services Colin Mouque says: “It is possible that the Secretary of State will lose his power to reduce PPF benefits in future, which strips away the Government’s only means of controlling runaway costs, which could lead to a crippling burden on UK employers.”

The case was brought by unions representing employees at Allied Steel and Wire and United Engineering Forgings and rested on whether the Government should have done more to protect the schemes under the 1983 EU insolvency directive.

The court ruled that the protection regime was inadequate under the directive but said it was up to the UK courts to decide on any compensation for those who lost out.

Amicus general secretary Derek Simpson says: “We are confident that when this case returns to the UK High Court, our arguments will be upheld and our members who, through no fault of their own, lost all or substantial parts of their pensions, will be fully reimbursed.”

Conservative Shadow Work and Pensions Secretary Philip Hammond says: “Gordon Brown has done untold damage to our pension system over the last 10 years. The Government has been found guilty of maladministration by the Parliamentary Ombudsman. Now this judgment has declared the level of pension protection in the UK inadequate. Yet Gordon Brown still will not listen.”

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