UK/EUROPE - Company pension costs could double if a union successfully sues the government for failing to protect members' pensions rights, HighamNobbs Consulting warns.
Steel workers’ union ISTC has appointed Thompson Solicitors to challenge the government over whether it implemented the 1980 European Insolvency Directive adequately.
The European directive instructs member states to protect the old age benefits of employees and former employees in the event of company insolvency.
The ISTC is looking to win compensation for ASW workers whose pensions were cut when their scheme was wound up in deficit following the insolvency of their employer.
If the test case is successful, the government would have to pay billions of pounds in compensation to workers of insolvent companies.
But HighamNobbs warned that the government would also have to legislate to implement this directive – laws that would add insurmountable costs to many UK companies, a 50% increase in many cases.
Partner Anthony Miller said: “We have calculated that UK companies will need to pay another £15bn a year into their company schemes to ensure that payments to members are protected, by securing comparable entitlements with insurance companies, in the event of insolvency.”
Even these estimates assume that companies are allowed 15 years to put the problem right – at a total cost of £200bn.
Miller fears that few companies would be able to afford such increases in contributions and many would be forced to consider winding up their final salary pension schemes.
He said this would sound the “death knell” for final salary pension schemes across the UK.
“Once again the very legislation that is aimed to protect members’ pensions is likely to be their greatest foe.”
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?
RPMI Railpen is in the next step in the journey towards achieving cost disclosure. Victoria Bell tells Stephanie Baxter about taking part in the Cost Transparency Initiative's pilot phase
Interserve's numerous defined benefit (DB) schemes have retained a sponsor link after the company entered into administration and was sold.
Chris Hannon has been named chairman of the Railways Pensions Trustee Company after a unanimous vote of approval from its board last week.