IRELAND - Trade unions are preparing to take legal action against the Irish government for failing to protect the pension benefits of employees in insolvent companies, as the Waterford Crystal pension schemes are now being wound-up with a deficit of €110m.

Unite the Union confirmed that the two schemes - one for executives and one for staff - are in wind-up and have combined assets of €120m but have  a total deficit of €110m.

This means once the benefits of pensioners are secured, active and deferred members are likely to receive a maximum of just 25-30% of expected benefits.

The union said it has been engaged in discussions with the government for a couple of months concerning pensions protection but their proposals to secure pension benefits for members had been rejected so it has "no option but to take legal action against the government".

It argues the Irish government has failed to comply with the EU insolvency directive by not introducing protection for employees, and said its legal action would be based on the EU judgement in the 'Robins' case, brought in the UK.

Walter Cullen, regional organiser at Unite the Union, said: "The situation here is that the workers in Wedgwood in the UK affected by the company going into receivership will get around 80-90% of benefits [through the PPF] but workers in Waterford (Ireland) will only get between 25-30%."

The union also revealed it is in discussions with other trade unions whose members could be affected by a similar situation in the future. In particular, it has flagged problems with pensions at SR Technics and Bord na Mona as potential issues, and Unite is talking with the Irish Congress of Trade Unions (ICTU) to get support for the legal action. (See earlier IPE article: Labour Court tells SR Technics to fund deficit)

Cullen also pointed out that some of the workers affected by the wind-up of the Waterford Crystal schemes will reach retirement age this year yet members who contributed to a DB scheme for 40 years may only receive a quarter of their pension.

"We are examining how we can expedite the legal proceedings to hear this case, and we are discussing the options with our legal department," said Cullen.

In the Robins case - based on the insolvency of Allied Steel & Wire (ASW) in 2002 - it was argued that the UK had failed to implement the employee protection part of the insolvency directive, as the two complainants highlighted they received only 29% and 49% of expected benefits.

Although the ECJ ruled governments were not necessarily responsible for replenishing underfunded scheme, part of the judgement stated the UK system - even after the introduction of the Financial Assistance Scheme (FAS) in 2005 - did not constitute sufficient protection 65,000 scheme members lost at least 20% of pension benefits as in 2004 through employer insolvency and over half of these lost more than 50% of their benefits. (See earlier IPE articles: ECJ finds member states not responsible for funding insolvent employers and European Court in preliminary ruling on UK case)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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