Ombudsman has 10 more pension `misuse' cases

The Pensions Ombudsman, Dr Julian Farrand, is considering a further 10 cases of alleging misuse of pension fund surpluses across the privatised electricity industry in the wake of the recent National Grid case.

The Ombudsman is attempting to grapple with a raft of different complaints involving surpluses identified by actuaries in 1992 and 1995. One of the cases involves a complaint by a pensioner against PowerGen's use of surpluses.

Dr Farrand had planned to delay making any decision on these cases until the outcome of a planned appeal by aggrieved pensioners against a recent High Court ruling in favour of the National Grid.

However, National Grid pensioners may be forced to abandon their fight over the group's use of a pounds 46m pension fund surplus, since the company has now formally refused to help fund their appeal costs.

In a letter from the Grid's solicitors, the pensioners are told that the company has decided against funding legal expenses incurred in pursuing an application for costs from the High Court. The two pensioners who brought the original case to the Pensions Ombudsman, Reg Mayes and David Laws, are not prepared to fund the estimated pounds 15,000 bill for the application themselves.

The hearing would have determined whether the company or the pension fund trustees should pay the pensioners' costs during a full appeal against the recent High Court judgement, which found in the company's favour. The Grid had remained neutral during a previous application for costs, which resulted in the trustees paying the pensioners' earlier court bill.

The pensioners only have until 8 July to lodge an application for costs. Each of the lead barristers in the case is thought to have charged around pounds 50,000 for the preparatory work and the first day's appearance, plus at least pounds 3,000 for each further day in court.

Peter Woods of Stephens Innocent, acting for the aggrieved pensioners, said the Grid's decision was a "big stick" to hit the pensioners with. "They can't afford to take any risks with money. This is of tremendous public importance but there's only so far they can go. I'm sure the National Grid would have appealed if they'd lost."

The Grid, supported by National Power, brought the court case after the Ombudsman ruled the company should pay back pounds 46m of a pounds 62m pension fund surplus, which was used to help fund the company's voluntary redundancy programme.

In a landmark judgment the Ombudsman argued the Grid had misused the cash because the rules of the Electricity Supply Pension Scheme specifically banned payments from the fund to the employer.

The Grid later won its argument in the High Court, where the judge said the Ombudsman's ruling had been "misconceived." Had the company lost its case, the privatised electricity industry would have had to hand back more than pounds 1bn to the pension fund. National Power alone faced a pounds 250m bill.

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