Grid faces further pounds 19m hit over pensions

National Grid, the privatised power transmission business, may have to pay back a further pounds 19m to its pension scheme, on top of the pounds 46m repayment ordered recently in a landmark ruling by the pensions Ombudsman, it emerged yesterday.

The Grid is also considering scrapping its pension scheme for all but existing members and replacing it with a less generous fund for new employees, should the company lose an appeal against the judgment likely to be brought in the High Court.

The moves follow a final ruling this month by the Ombudsman, Dr Julian Farrand, which said the Grid must return a surplus taken from the fund after a valuation in 1992. Dr Farrand has argued that the rules of the fund, part of the industry-wide Electricity Supply Pension Scheme, specifically outlawed payments to employers. The Grid had allocated 70 per cent of a pounds 62.3m surplus to itself to fund voluntary redundancy payments, while 30 per cent went to pensioners in enhanced benefits.

The additional pounds 19m surplus came from a second actuarial valuation of the pension scheme in 1995. National Grid confirmed that the surplus cash had been identified as the property of the company under its reading of pensions law.

Across the industry the total repayment could reach pounds 1bn. National Power, which removed almost pounds 200m, has already begun its own court proceedings to clarify the Ombudsman's decision. Eastern Group has said it may have to give back pounds 75m.

In another development, trade unions representing workers across the electricity industry are now publicly supporting National Grid and opposing the legal action brought by two pensioners, David Laws and Reg Mayes. Tony Cooper, secretary of the Electricity Supply Trade Union Council, said if the Grid lost a court case it would mean less investment and more job cuts. Mr Cooper is also general secretary of the Engineers' and Managers' Association, whose members include the two Grid pensioners.

He said: "We will be faced with the closure of the pension scheme and we fought for many years to get good pensions in this industry. Newcomers will be faced with a lousy scheme."

A Grid spokeswoman said: "It is possible we will close down the scheme and start a new one. It won't be a final salary scheme."

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