The Government could face a £6bn pensions liabilities bill after the European Commission backed a test case brought by unions.
Commissioners say successive British administrations have failed to implement a European directive protecting the retirement benefits of employees at insolvent companies.
The commission has made a formal submission supporting the unions' case.
The Community and Amicus unions are taking legal action at the European Court of Justice claiming the British Government failed to comply with European insolvency law which should have protected the pensions of 1,000 former employees of Allied Steel and Wire (ASW) at Cardiff and Sheerness. The unions say a European court victory would benefit at least 56,000 Britons deprived of a full pension in similar circumstances.
The Government has insisted that it has met all its obligations.
Some ex-employees of ASW, which had two "seriously under-funded" schemes, have been told they will receive only 14 per cent of their expected entitlement. Many had paid into the scheme for 30 years or more.
The test case is not due to be heard until spring 2007, but the unions are urging ministers to settle now, or agree to have the hearing brought forward to "end the misery" of former ASW workers.Reuse content