BusinessCompany NewsGovernment faces pensions clobbering

Government faces pensions clobbering

The government could have racked up a £2.5bn bill for failing to protect pensioners when companies go to the wall.

Link: Labour under fire over liability

The ISTC union, which is suing the government, said that the government was likely to be hit with the massive liability.

Representing 1,000 steel workers who lost most of their pensions when Allied Steel & Wire collapsed, the union says successive governments failed to protect workers in accordance with duties under European insolvency law.

The case is based on article 8 of the 1983 European Insolvency Directive, which requires governments to ensure that the necessary measures are taken to protect the pension rights of employees and former employees of companies that have gone out of business.

The huge potential liability was calculated on the basis that a successful judgement could set a precedent for 65,000 other employees who lost pension benefits when their companies went to the wall.

Elmer Doonan, a lawyer at Denton Wilde Sapte, predicted that the case had a ‘reasonable’ chance of success.

‘Since Maxwell, you can see there has been an aim to provide greater protection, but I very much doubt it has been intended to implement this directive,’ he said, adding that victory for the union would result in a ‘fairly massive bill’ for the government.

A Department for Work and Pensions spokesperson said: ‘The government’s position remains that it has met obligations under article 8 as successive governments have done since the directive was adopted.’

The ISTC will present its case between 9 and 11 November at the High Court, from which it hopes to win a referral to the European Court of Justice.

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