UK – The ruling by the House of Lords (April 5) that electricity supply company, National Grid, may use its pension fund surplus to pay for redundancies through enhanced early retirement, is likely to be challenged in the European courts.

Mark Stephens, partner at Finers Stephens Innocent, the law firm representing pensioners from the Electricity Supply Pension Scheme who claim that National Grid unlawfully took£46.3m in surpluses from the Scheme in 1992 to finance redundancies and reduce future liabilities, says they are still reflecting how they will appeal, but comments:
“It does seem to us that the sorts of issues that have been raised by this case are the sorts of issues that both the European Court of Justice and the European Court of Human Rights will want to examine and review.”

Stephens adds: “ One of the key issues in the case was whether or not a company that owed money to a pension fund, and had done so for six years, could retrospectively change that pension fund so as to relieve themselves of the obligation to make payments into it.
“ I think most people would think that offended against every notion of justice.”

He noted that retrospective changes in pension funds were always regarded as offensive and expressed his surprise that they hadn’t been on this occasion.
“Lord Hoffman (House of Lords) made it clear that he took a commercial view of the case and basically felt that there were two tenable interpretations, but that he preferred what he described as the commercial interpretation, which is basically – let’s give the money to big business rather than the individual or small pensioner.”

Stephens says the pensioners will look to present their case in the next month.
And he believes that the Lords’ decision could throw the pensions industry into some disarray.
“ I think that OPRA for some time has been trying to ensure that companies pay into pension funds with regularity.
“ This is clearly going to encourage firms to delay payments into pension funds, so that at the end of the day they can make the decision as to whether or not they can relieve themselves of that obligation.
“That question is going to be all the more important when you’re in a situation where there is perhaps a down turn in the economy.”