UK government must act after European pensions ruling

The UK government has been challenged to act decisively to end confusion over pension liabilities after last week’s fudged ruling at the European Court of Justice (ECJ).

Many final salary pension schemes are hanging in the balance ahead of a verdict in the landmark case. The UK government is defending its right to not pay full entitlements to members of final salary schemes whose companies go bust.

The ECJ, widely expected to find the government liable to pay the full value of such pensions, instead prolonged the confusion by referring the case back to the UK High Court.

Phil Wadsworth, head of consulting at employer advice firm JLT Benefit Solutions, said: “It is the government’s mess and it should be bold enough to act.”

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The ECJ found that the UK system did not constitute proper implementation of EU law – but also that EU law did not require a guarantee of 100% protection of pension benefits.

If the High Court significantly increases the liabilities of government, many pension schemes will face unsustainable payments into the Pension Protection Fund.