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Pensions lawyer says concerns over ECJ ruling ‘over the top’

UK - The current concern caused by an imminent European Courts of Justice (ECJ) ruling on government pension protection liabilities is "over the top", a pension lawyer tells IPE.

Some commentators fear that levies for the Pension Protection Fund (PPF) will explode depending the outcome of the ECJ ruling.

On January 25 the ECJ will rule in the case surrounding Allied Steel and Wire employees who had lost their pension when the group went insolvent in 2002.

In July, the Advocate General made a preliminary judgement saying that the UK government was not liable for the worker's pensions although some flaws in the protection for workers in case of company insolvency were found.

"Assuming that the ECJ follows this preliminary assessment this would be quite positive for the UK government," Hywel Robinson, partner in the pensions group at Clifford Chance, explained to IPE.

He said that some of the reactions to the possible outcome of the ruling, which speak of an immediate expansion of the PPF are "over the top".

Colin Mouque, director at Alexander Forbes Financial Services, commented on the imminent ruling: "The PPF was destined for oblivion in 10 years - if the EU's ruling is enforced, the PPF will not last even two."

Media comments on the ruling have predicted a faster death of final salary DB schemes as corporates fear higher levies.

But Robinson at Clifford Chance said it is unlikely that the government will make any immediate changes to the PPF just because of this case which will give a verdict on the old system in the UK prior to the 2004 Pension Act.

"The PPF and the new scheme funding rules have significantly strengthened security of members," he said.

He thinks that most corporates will conclude that the ruling "will not have the dramatic implications some people think it will have". Robinson added that in his view the government would only change the current levy for the PPF if there was a very strong steer from the ECJ. "And I don't think that this case is it," he said.

Meanwhile, the Pensions Regulator has published the levy guidelines on its homepage under http://www.thepensionsregulator.gov.uk/aboutUs/levyRegistration/index.aspx

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