‘Gold-Plated’ Occupational Pensions Lose Their Lustre

Occupational pensions used to be considered gold-plated – but not anymore, it seems, after a retired employee’s campaign to increase levels of compensation paid by the Pension Protection Fund (PPF) fell on fallow ground at the High Court.

Having achieved a senior position within a large company for which he had worked for many years, the man expected to receive an index-linked pension of more than £56,000 a year. However, eight years after his retirement, the company went into liquidation and his benefits had been capped by the PPF at about £20,000 a year, roughly 26 per cent of the amount to which he would otherwise have been entitled.

His lawyers argued that the cap flew in the face of the requirements of European law that member states take ‘necessary measures’ to protect pensioners whose rights are undermined by corporate insolvencies. It was submitted that the cap had been set too low and that he and others in the same position were entitled to be paid at least 50 per cent of the benefits which they would otherwise have received.

However, in rejecting those arguments, the Court found it ‘almost inconceivable’ that it was unlawful to cap the man’s benefits. There was also nothing in European legislation which required the UK government to guarantee every employee of every insolvent pension scheme a minimum of 50 per cent of his contracted benefits.