The Pension Protection Fund's (PPF) compensation cap and restrictions on annual indexation increases could be at odds with EU law, according to a provisional judgement by the Court of Appeal.
The court's 28 July judgement on Grenville Holden Hampshire vs. The Board of the Pension Protection Fund said these provisions under the Pensions Act 2004 which can result in compensation below 50% guarantee may not comply with EU law.
It cited the Court of Justice of the European Union's (CJEU) interpretation of European law in the Robins and Others v Secretary of State for Work and Pensions and Hogan & Others v Minister for Social and Family Affairs (Ireland) cases, and has referred the case to the CJEU for a final ruling.
The case follows a challenge by Grenville Hampshire and 15 other former employees of Turner & Newall against the PPF's s143 valuation of the company's pension scheme.
In December 2014 the High Court rejected Hampshire's appeal that compensation less than 50% of accrued pension benefits was inconsistent with the EU's Employer Insolvency Directive. The case was then appealed to the Court of Appeal.
However, in its provisional finding yesterday, the Court of Appeal considered the point was not free from doubt and has asked the CJEU for a ruling.
It has referred several questions to the EU court over whether aspects of the Pensions Act 2004 that limit compensation paid out by the lifeboat fund are in line with the EU's Employer Insolvency Directive. It is also asking the court whether article 8 of the law is directly effective, and can therefore be invoked directly against the PPF to override terms of the 2004 Pensions Act.
The PPF and Secretary of State for Work and Pensions had argued EU law only asks member states to implement a suitable system of protection, without having to give every single person the right to 50% minimum compensation.
Hampshire and approximately 40 other scheme members are subject to the PPF compensation cap, which they claimed in a number of cases restricts compensation to less than 25% of their pension.
The judgement noted if Hampshire had reached normal pension age before the date of assessment in 2006 he would have been entitled to 100% of his starting pension without reduction by the cap.
Hampshire, who was represented by barristers Gerry Facenna and James Bourke of Monckton Chambers, said in a statement: "We have been waging this campaign for over 10 years and I believe that today's judgement vindicates me and my colleagues in T&N and other pension schemes. For many years we tried through dialogue involving our political representatives to persuade government to address our concerns but failed to receive a coherent response.
"This was a frustratingly slow and unproductive process and it was only because of government's unwillingness to take any action despite the fact that any resolution would not involve public money that we reluctantly resorted to the court action. My only regret is that we did not do so earlier. Our fight for justice is by no means over but today's judgement represents a significant step forward in our campaign."
A spokesperson for DWP said it would be inappropriate to comment until the European Court of Justice has heard the case and given its judgment.
A PPF spokesperson said: "We cannot provide detailed comment on this ongoing case. Members are currently receiving benefits from the Turner and Newell scheme at the compensation levels set out in the Pensions Act. They can be reassured that this is at least the minimum that they will continue to receive."
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