Pensions? What pensions? Legal battle with steel firm

A case brought to the European court by unions Amicus and Community has had a major boost after the European Commission came out in support of their campaign to prove the government has failed to implement a directive which could have saved the pensions of over 1,000 steelworkers.

The former ASW steel company in Cardiff and Sheerness was declared insolvent in 2002, leaving two funds in deficit. The funds, which should have been protected by a European law to protect workers' pensions when companies are no longer able to provide for the funds are not enough to cover members.

Ex-employees in Cardiff have been told that they will receive only 14% of their expected pension, many of them after paying for 30 years or more into the scheme. In addition, widows whose husbands have subsequently died when they were in the late 50's have received no financial support from the underfunded pensions schemes, whereas, if successive UK Governments had complied with Article 8 they would have received death in service benefits as well as a pension to live on.

The European Insolvency Directive stated in Article 8 that member states should have had a means to deal with such problems set up by 1983, but the directive was largely ignored by the then Conservative party, according to Amicus. Article 8 says: "Member States shall ensure that the necessary measures are taken to protect the interests of employees and of persons having already left the employer's undertaking or business at the date of the onset of the employer's insolvency in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors' benefits, under supplementary company or inter-company pension schemes outside the national statutory social security schemes."

The Pension Protection Fund was subsequently set up in April last year in response to the collapse of ASW and widespread fears of a more widespread future collapse of the pensions system.

The fund however is not retroactive, and the government have said it cannot cover cases of corporate insolvency from before 2005. Under these rules the ASW collapse would not be covered, but the unions are confident that they can prove the government have violated EU law by not preparing a means to protect workers until now and are liable. Amicus have estimated that up to 65,000 workers across the country could be affected by this policy, with pension liabilities amounting to approximately £6bn should they win.

In a statement, the two unions said: "If the PPF does not comply with Article 8 then how can the UK be compliant before that when no effective protection was in place? We believe that Ministers in successive Governments throughout the 1980's and 1990's knew this but cynically hoped that they could get away with doing nothing. Now our members are paying the price. It is a scandal."

The Confederation of Business Interests (CBI) complained in early February that the expansion of the government's Pension Protection Fund is 'unacceptable'.

Following new analysis of the pension deficit, the government had been advised to increase the size of the fund to £575m, to take into account a greater likelihood that companies would be unable or unwilling to meet their pension requirements.

The fund, which acts as an insurance system for private pension schemes in danger of going bust, was originally set up with a requirement that £300m should be raised annually from sections of the business community withholding private pension schemes.