- Interpretation of EU case law on protection of pension payments on employer insolvency not “entirely free from doubt”
The claimant (C) was a member of the T&N defined benefit pension scheme from 1971 to 1998. In 2006, the scheme entered a PPF assessment period and C calculated that his pension under the PPF would, as a result of caps and limitations on indexation, be roughly 67% less than what he had previously expected.
C challenged the level of compensation on the basis that it breached Article 8 of the Employer Insolvency Directive and that the UK had not taken “necessary measures” to ensure that pension benefits were sufficiently protected. While the wording of Article 8 is not specific in its terms, C relied on two previous decisions of the CJEU, Robins and Hogan, to support his argument that at least 50% of his pension entitlement should be guaranteed by the PPF. The PPF argued that Article 8 was not intended to confer a minimum level of pension in each individual case.
The High Court followed the earlier decision in ITS V Hope (on which Taylor Wessing acted for ITS) and rejected C’s claim on the basis that the Hogan decision (which referenced a 50% minimum level of payment) should not be read literally. The Court of Appeal disagreed with the High Court judge on the interpretation of the Robins and Hogan decisions, however, accepting that the position was not clear and referred the matter of implementation of Article 8 and minimum levels of compensation to the CJEU.
If the CJEU agrees with C’s interpretation of its previous decisions, the result may be that the PPF has to guarantee at least 50% of every member’s pension entitlement which will clearly have a financial implication for the PPF and the levy-payers. The outcome of the reference may of course prove academic depending on the outcome of Brexit negotiations.