Employers face 10bn bill after pensions ruling

By: John Mason, Simon Targett and Jean Eaglesham
The Financial Times, February 8, 2001

Employers face a bill of several billion pounds after the House of Lords ruled that part-time workers who have been denied pension rights may be entitled to compensation backdated to 1976. The ruling - clarifying a European Court of Justice judgment last May - is a significant victory for part-time workers, most of whom are women. The government lost a second challenge to its employment laws when the European court ruled separately against its decision to exclude short-term and freelance workers from the right to take four weeks' annual paid leave. Until yesterday's Lords ruling, the law prevented claims to pension rights being back-dated more than two years. By allowing claims back to 1976, the law lords have opened the doors to thousands of fresh cases for back-dated pension rights to be brought against employers. The likely cost to employers is unclear and much will depend on how many cases are brought in future. Estimates by government actuaries that the bill could be between 10bn and 17bn are widely regarded as a worst-case scenario. Other estimates put the likely cost to employers at about 4bn. Unions that brought the test case against HSBC Group and Wolverhampton Healthcare NHS Trust lost on one aspect of the law. The law lords said claims had to be registered within six months of leaving employment, rather than the six years unions had wanted. This aspect of the ruling could reduce the number of claims currently against employers from 60,000 to around 25,000, according to Jane Samsworth, head of the Society of Pension Consultants. But she said "an unknown number" of people still in employment would be entitled to make a claim once they moved to another job. Tom Flanagan, an employment lawyer with Stephenson Harwood, which acted for HSBC, said many employers were unprepared for the ruling because they had acted within UK law between 1976 and 1994 in not offering access to pension schemes to part-time staff. "This could be very expensive for middle-sized companies," he said. "Larger employers may be able to bear the costs and smaller companies are less likely to have claims against them." The National Association of Pension Funds welcomed the ruling. 

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