National Power pensioners get a second chance

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National Power pensioners were yesterday given a second opportunity by a High Court judge to fight the company's use of pension scheme surpluses to help fund its post-privatisation redundancy programme.

In an unusual step, Mr Justice Robert Walker agreed to reopen the court case after lawyers representing the pensioners discovered what they claimed was a "fundamental flaw" in his earlier judgment. Solicitors from Lovell White Durrant, representing the pensioners, predicted the company could have to pay back pounds 100m into its pension fund if the judge decided in their favour.

Last month Mr Justice Walker had ruled against pensioners from National Power and National Grid, who had campaigned against the employers' use of pension fund surpluses to fund the increased costs to their pension schemes of voluntary redundancy programmes.

The two groups went to court after the Pensions Ombudsman, Julian Farrand, decided they had "misused" the surplus cash. Had they lost the case, the privatised power industry could have had to pay back more than pounds 1bn.

In court yesterday the judge decided to hold a further hearing as soon as possible to assess the new arguments. He also rejected National Power's request to submit additional evidence to the court.

The pensioners' lawyers will argue that National Power breached Inland Revenue rules, following its decision in the early 1990s to pay money into its pension scheme in instalments to cover the increased redundancy burden. By 1993 it owed its pension scheme pounds 188m, as thousands of staff opted to leave the company. When a pounds 303m surplus was signed off by its trustees in 1993, the company offset the money against these outstanding liabilities.

In a statement yesterday the company said: "National Power is absolutely confident that there has been no material error of fact and that the judgment will stand."

National Grid pensioners, who are not directly affected by the National Power developments, yesterday lodged an appeal against the previous court ruling.

However, their solicitor, Peter Woods from Stephens, Innocent, said the new issues raised in the National Power case could also apply to the Grid, where the company used pounds 46m of a pounds 62m surplus to fund its redundancy costs. He said if the same argument about instalment payments was applied to the Grid, the company could have to repay pounds 7m to its scheme.

It also emerged that the two Grid pensions who brought the original case, Reg Mayes and David Laws, have asked the Trades Union Congress for financial help to fight the appeal. The company has refused to back their planned application to the High Court to decide whether the pension scheme would pay appeal costs likely to run into tens of thousands of pounds.