Outlook: Pension victory?

THE "VICTORY" that the National Grid Two won in the Court of Appeal yesterday may prove a pyhrric one, not just for pensioners of the electricity industry but for employees right across the land. Dave Laws and Reg Mayes have fought an heroic battle against the Grid for the last six years in an attempt to prove that it misused the surplus in its pension fund when it spent pounds 46m of the money to finance redundancy payments at the time of privatisation.

Since this was a test case, up to 200,000 pensioners of the electricity industry who are members of the same fund and suffered similar losses stood to benefit to the tune of pounds 1.5bn.

There is a point of principle here. The Grid has argued consistently that since employers are required to make up the deficit in final salary pension schemes, they should also be entitled to any surplus that arises. This, however, ignores the principle that pensions are a form of deferred pay, not a pot of gold to be raided by employers. The Grid also argued that its treatment of the pension surplus was equitable since it shared out the surplus between the company and the members in the same ratio as each had contributed - two to one. This ignores the fact that the bulk of the surplus was accumulated while the electricity industry was in public ownership.

While the legal battle has raged and the lawyers' meter has been running, some of those pensioners who might otherwise have been enjoying enhanced benefits have died. By the time the Grid has appealed to the House of Lords against the Court of Appeal ruling, another two years will have expired, along with yet more pensioners.

In simple headline terms, the three judges yesterday upheld the appeal of Mr Laws and Mr Mayes against an earlier High Court ruling that the Grid had been within its rights. But the idea that the ruling will open the floodgates is almost certainly fanciful. For the Appeal Court also ruled that surpluses in pension funds do not belong to their members and that it would be "grotesque" for the Grid to now make additional payments into a fund that continues to be in substantial surplus.

Moreover, the Appeal Court accepted the argument that employers are entitled to take account of their own interests when deciding what to do with pension surpluses. In effect, the Grid was found guilty of a technical breach of pension fund rules by having failed to make the appropriate amendment to its scheme before it took its share of the surplus.

The Grid has now been advised that the maximum it will have to pay into the fund is pounds 10m. National Power, which took pounds 250m from the surplus and fought a parallel case against its pensioners, reckons it may not have to make any payments into the fund at all.

Even if higher payments do have to be made, that may not mean increased benefits for members. The employers may simply use those payments as credits against future contributions.

So a great battle over principle may in the end yield very little for the pensioners in practice. And yet the publicity generated by this cause celebre may persuade more and more companies to abandon final salary schemes, which are expensive to fund, and move to money purchase schemes, which are cheaper, and less attractive to employees. In that case Mr Laws and Mr Mayes will have won a victory but at the expense of millions more losers.

PROMOTED VIDEO
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior Analyst - ALM Data - Banking - Halifax

£350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

Java developer - Banking - London - Up to £600/day

£500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

Liquidity Reporting-Basel III-LCR-Bank-£400/day

£400 per day + competitive: Orgtel: Liquidity Reporting - Basel III - LCR - Ba...

Client Services Associate (MS Office, Analysis, Graduate)

Negotiable: Harrington Starr: Client Services Associate (Microsoft Office, Ana...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz