UK - Union leaders want compensation laws changed to give pension payments a higher priority.
The call follows the collapse of United Engineering Forgings, which left an estimated £12m hole in its £90m pension fund. The shortfall means that 1300 UEF workers face cuts in their pensions of up to 70%.
Transport and General Workers’ Union regional secretary Andy Baird said: “This case needs to be looked at by the government and we need legislation to make sure this doesn’t happen again. Why should a supplier get priority over someone who has worked at a company for 40 years?”
A leading pensions lawyer commented: “The case highlights the plight of deferred members in many final salary schemes which go into winding up whether because of an insolvent employer or otherwise.
“Such members are way down the statutory priority order set out in section 73 of the Pensions Act 1995, which broadly determines how the assets of a scheme in wind-up should be distributed between the membership.”
Prudential – UEF’s largest shareholder – has also become embroiled in the dispute.
Former UEF workers protested outside of Prudential’s London headquarters holding placards that blamed the insurer for allowing the scheme to become underfunded.
UEF’s pension fund was found to be in shortfall in March 2000. Under the minimum funding requirement, the company increased its contributions from 10% to 14% and asked its employees to increase their contributions from 5% to 7% in a bid to rectify the deficit.
Pinsent Trustees, the independent trustee for the UEF pension scheme, has estimated that it will take up to 18 months before the exact shortfall is calculated.
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Malcolm Mclean says getting the channels of communication right and engaging more openly is a good starting point