The House of Lords has ruled that part-time employees in the UK can retrospectively claim pension benefits back to 1976 – as long as claims are made within six months of leaving employment.
The ruling follows last May’s judgement by the European Court of Justice that the UK’s two-year limit on backdating claims was contrary to community law.
However, experts disagree on the amount the ruling on part-timers will cost British employers.
The government, which opposed the ruling, estimates the cost at £10-17bn (e16-27bn), while other predictions place the cost at around £4bn.
“The ruling is disappointing. It would be hard to put an exact figure on the cost but it will clearly be substantial and could effect investment and growth,” says Digby Jones, director-general of the Confederation of British Industry.
Consultant William M. Mercer, however, believes the figure will be much lower: “The total cost to British industry is likely to be well under £0.5bn – far less than some of the more fanciful estimates have suggested,” says Ian Yonge, senior solicitor at Mercer.
Mercer notes that there are a number of factors that will soften the blow for employers.
“The criteria for claims are quite stringent, and are likely to limit the number of successful cases. Claimants need to prove both sex discrimination and financial loss, which means finding an equivalent full-timer of the opposite sex with proportionately higher benefits. In addition, claimants must also be prepared to pay their share of back dated pension contributions for the period of their claim,” says Yonge.
The UK National Association of Pension Funds (NAPF) has welcomed the ruling. In anticipation of the announcement it has been working with the tax department, Inland Revenue, and the Department of Social Security to identify and resolve some of the administrative complications arising from the issue, the association says.
“Given the announcement by the House of Lords, we will now be able to pursue these issues with a greater degree of certainty,” says Geof Pearson, vice chairman of the NAPF.
“The ruling goes a long way to lifting the paralysis, which has been afflicting schemes as they seek to settle the pension entitlements of part-time employees and former employees,” notes Pearson.