Senior Partner Anna Rogers comments in FTAdviser, Professional Adviser, Pensions Expert, Pensions Age, Professional Pensions, and IPE on the consequences of the ECJ’s Bauer Judgment on the UK DB pensions system
In a judgment delivered in Pensions-Sicherungs-Verein VVaG v Günther Bauer on 19th December 2019, the ECJ said reductions in benefits paid to former employees due to a company insolvency could be “manifestly disproportionate” if it puts the member below an EU member state’s poverty threshold. This is even the case where the member is still receiving half of their pre-insolvency benefits, as dictated by a separate ECJ ruling last year.
However, it said “member states have considerable latitude in determining both the means and the level of protection of employees’ accrued entitlement to old-age benefits”. It added the current law cannot therefore be “interpreted as requiring a full guarantee of the rights in question”.
Arc Pensions Law senior partner Anna Rogers commented: “The Bauer ruling applies a minimum income test. 50% PPF compensation is not enough if the member is below the ‘at risk of poverty’ income level as measured by Eurostat. This looks like a change that will be hard to handle for the PPF but the financial impact will be mitigated. It also looks like something complicated to disentangle post-Brexit.”
Anna also noted the poverty threshold “looks like a level playing field in terms of minimum income to be protected, but is not level at all for people who have saved more or are still working”.
She also said it would be an issue to deal with “post-Brexit as members’ rights may still apply under UK law, and/or under the terms of a trading relationship”.
Nevertheless, “whatever rights members have – and this is going to take time to work out – will be enforceable either against the PPF or the government,” she concluded.
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