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Last Updated: Thursday, 25 January 2007, 10:10 GMT
EU rules on bust pension schemes
Protesting pensioners
The issue of lost pensions has sparked protests
Thousands of people in the UK who lost their pensions when their employers went bust may have moved a step closer to securing compensation.

The European Court of Justice said that under the European Union Insolvency directive, the UK government pension protection regime is "inadequate".

But the ruling fell well short of saying people should be compensated.

The case will now go back to the High Court, which may rule that people who have lost out should be compensated.

Paying compensation could cost hundreds of millions of pounds.
The Court appears to have given a steer that damages may not be payable, but this is now a matter for the High Court to decide
Department for Work and Pensions spokesman

Schemes shut

The case has been brought by unions representing former employees at Allied Steel and Wire (ASW) and United Engineering Forgings (UEF).

Both shut in 2002 with staff losing their pensions as a result.

The case rests on whether the government should have done more to protect these workers' pensions under the terms of the EU Insolvency Directive, which was introduced in 1983.

Under the directive member states are required to take measures to protect the pensions of employees in the event of their employer's insolvency.

The case has wide implications for an estimated 125,000 workers who have lost their pensions, when their companies went bust, going back as far as 1983.

While saying that the pensions protection regime was inadequate, the European Court added that it did not mean that the government had to compensate those who had lost their pensions.

"The court finds that the (EU) directive does not oblige the member states themselves to fund the rights to old age benefits," it said in a statement.

It will now be up to the High Court in London to make the final ruling on the case.

A Department for Work and Pensions (DWP) spokesperson welcomed the European Court's judgement.

"This is a common sense judgement which recognises that Article 8 (of the Insolvency directive) does not require member states to ensure pensions are guaranteed in full.
We are confident that when this case returns to the High Court, our arguments will be upheld
Derek Simpson, Amicus

"The Court appears to have given a steer that damages may not be payable, but this is now a matter for the High Court to decide," the spokesperson added.

'Confident'

The Amicus trade union, which is a party in the case, said it was "confident" of persuading the High Court in London that compensation was due.

"We are confident that when this case returns to the High Court, our arguments will be upheld and our members who, through no fault of their own, lost all or substantial parts of their pensions, will be fully reimbursed," said Derek Simpson, general secretary of Amicus.

However, groups representing people who have lost their pensions told BBC News that there was little sign of instant relief.

"This is just another stage in a long drawn-out process," said Peter Humphreys, head of Pensionstheft.org.

"Ultimately, we hope the pressure will tell on the government and those people who are struggling to make ends meet or face massive holes in their pensions will receive full compensation," he added.

In 2006, the government rejected a call by the Parliamentary Ombudsman for people who had lost their pensions to be compensated.


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