EU Advocate General concludes that UK pension protection rules are contrary to EU law

27 Apr 2018

In her Opinion dated 26 April 2018, Advocate General Kokott concludes that restrictions on the compensation payable by the UK Pension Protection Fund (PPF) to employees of insolvent companies is contrary to Directive 2008/94/EC (the Insolvency Directive).

The Advocate General accepts all of the arguments of the claimant Mr Hampshire, represented by Monckton Chambers’ Gerry Facenna QC and James Bourke. In particular, the Advocate General agrees that (except in cases of abuse) EU law entitles every employee of an insolvent employer to receive at least half of the total value of their accrued pension benefits, including any indexation benefits. The Advocate General also agrees that Article 8 of the Insolvency Directive is directly effective and can therefore be relied on directly against the Pension Protection Fund to override the terms of the Pensions Act 2004, and that in practice this binds the trustees administering any pension scheme that is or has been subject to PPF assessment.

Assuming the Advocate General’s Opinion is followed by the Court of Justice, it will represent a significant victory for Mr Hampshire and hundreds of pensioners who have campaigned against the UK’s pension compensation cap for over a decade. Of potentially even greater significance than the ruling on the cap is the impact of any ruling that pensioners in receipt of PPF compensation must receive at least half of any entitlements to annual increases in their pension. Such a ruling would potentially benefit thousands of PPF members, including those who may have initially received a high percentage of their original pension but who have lost any accrued rights to index-linked or guaranteed annual increases.

The Court of Justice has not yet announced a date for its judgment.

Gerry Facenna QC and James Bourke, instructed by Ivan Walker of Walkers Solicitors, are acting for Mr Hampshire.

A copy of the Advocate General’s Opinion is available here.

A previous news item on the reference by the Court of Appeal is here.