Power firms flout pension ruling

TWO OF the country's biggest electricity companies have decided to keep pounds 600m owing to their occupational pension schemes, even though the Court of Appeal ruled last month that they had acted unlawfully in using the money to fund post-privatisation redundancy schemes.

National Grid and National Power intend instead to amend the rules of their pension schemes retrospectively so that they do not have to repay the money, which was taken from the surpluses built up in the two funds.

The controversial move comes in advance of an Appeal Court hearing in May to decide how the judges' ruling last month should be implemented. It has outraged pensioners who have been fighting a six-year legal battle to recover the money.

Depending on the outcome of the case, up to pounds 2bn may have to be repaid into pension schemes covering 230,000 current and former employees of the electricity industry.

National Grid has decided not to wait for the outcome of the new Appeal Court hearing, scheduled to take place on 24 and 25 May, but amend its scheme in advance.

The move has angered lawyers acting for David Laws and Reg Mayes, the two National Grid pensioners who first brought the case in 1993. They intend to lodge a fresh complaint with the Pensions Ombudsman, Dr Julian Farrand, who ruled originally in the pensioners' favour.

Peter Woods of Stephens Innocent, solicitors for the two pensioners, said: "It is extraordinary to proceed in this way and seek to pre-empt the hearing. By amending their schemes retrospectively, the companies are rendering the Court of Appeal's judgement irrelevant."

However, a spokesman for National Grid insisted that the Appeal Court judges only found the company had acted illegally on a "technicality" and that the ruling itself raised the possibility of the two companies being permitted to amend their rules retrospectively.

The Grid spokesman added: "We are putting that to the test and asking the court if that is acceptable because it will not address hypothetical issues."

Mr Laws said: "It would be awful if there was nothing for the pensions at the end of the day. It would be an indescribable injustice."

The Grid insisted, however, that even though it had used a proportion of the surplus to cover a deficit in the fund arising out of early retirement and voluntary redundancy, the scheme remained one of the most generous in the industry.

The latest actuarial valuation of the Electricity Supply Pension Scheme has just been completed. This shows that the scheme, which is split between 23 companies, was valued at pounds 18.8bn on 31 March 1998 and had a surplus of pounds 1.05bn.

National Grid's scheme had net assets of pounds 1.295bn on the same date and a surplus of pounds 94.5m.

Together National Grid and National Power used just over pounds 400m of their surpluses in 1992 and 1995 to help fund early retirements. This represented two-thirds of the surplus. The other third was used to enhance pensioner benefits. The split was determined pro-rata on the basis of employers and employees' contributions to the funds.

A spokesman for the Electricity Association said that the latest pounds 1bn surplus would be apportioned in the same way, enabling the companies to take a contributions holiday.

But Mr Laws and Mr Mayes have always maintained that the pension surpluses should be treated as deferred pay and "not a pot of gold to be raided by the fat cats running the privatised electricity supply industry".