Part-time ruling may clobber UK funds
UK occupational pension funds could be faced with a bill for tens of billions of pounds following a declaration by Phillipe Léger, Advocate General of the European Court of Justice (ECJ) that the court declare against the two year backdating rule for part-time workers’ entitlement to retroactive membership of occupational schemes.
And the amount could snowball if applied to pension schemes in European countries with similar legal limitations.
In the proposal made last month regarding the case of Shirley Preston v Wolverhampton Healthcare NHS Trust, Léger argues that the ECJ should declare UK legislation incompatible with EC law. Citing a 1994 ECJ case allowing for equal pay and pension rights between men and women retrospectively applicable from April 8 1976, Léger says part-time workers should enjoy the same benefits or risk finding it “virtually impossible or excessively difficult” to exercise their rights under community law. This would mean employees could claim up to 23 years of backdated pension provision.
However, he believes workers will only be able to seek retrospective payment if they pay the contributions due in respect of the relevant employment periods.
Simon Pilcher, solicitor in the pensions group at the London office of CMS Cameron McKenna, says: “This case is set to impact on the estimated 60,000 similar cases which industrial tribunals are currently reported to have on hold. The total cost of these claims could be tens of millions of pounds, a figure calculated by the UK government actuaries department.
“The vast majority of cases like this are followed up by the court and all European countries probably have similar backdating limitations for this kind of legal action, which would bring them under any ECJ ruling.”
In the UK, many schemes which did not allow participation for part-timers were changed between 1986 and 1995 to offer equality with full time workers. UK procedure which re-quires workers to bring any legal proceedings within six months of leaving employment is not deemed incompatibile with community law by Léger. An ECJ decision on the case is expected in due course.
UNISON, the UK public service employees union which has 10,000 members who could be affected by any final European court decision, has welcomed Léger’s declaration.
Glyn Jenkins, UNISON head of pensions, comments: “Employers who previously discriminated against part-timers, would, if the advocate general’s opinion is upheld, have to pay their fair share of the cost. Bad employer practice should no longer be subsidised by the tax payer.”