Retirement Benefits : Employees Less Protected against an Employer's Insolvency

European Social Policy, February 14, 2007 | Go to article overview

Retirement Benefits : Employees Less Protected against an Employer's Insolvency


In its nuanced judgement, the EU Court of Justice recognises that member states themselves are not obliged to finance rights to old-age benefits under supplementary pension schemes in the event of the employer's insolvency. It also recognises that an inadequate level of protection of such rights, as is the case in the United Kingdom, infringes Community rules and, in certain conditions, can engage the state's liability (judgement of 25 January 2007, Robins and others, Case C-278/05).

The case submitted to the Court concerned 836 employees of ASW Limited, among them Mrs Robins, who were members of pension schemes funded by their company. When the schemes were terminated - after which the company was wound up - they had the unpleasant surprise of learning from the account managers that "there will be insufficient assets to cover all the benefits of all members," and that the benefits of non-pensioners would therefore be reduced, some by as much as 50%.

Yet, under the 1980 directive on the protection of workers in the event of the employer's insolvency, the member states are obliged to ensure that the "necessary measures are taken" to protect the interests of workers and former workers in the event of the employer's insolvency, with respect to acquired or accruing rights to old-age benefits under supplementary pension schemes. The question put to the Court was therefore whether such an obligation is absolute.

NO FUNDING OBLIGATION

The Court has ruled that the directive does not oblige member states themselves to finance rights to old-age benefits or to adopt a full guarantee of such rights. It gives the member states considerable latitude on the mechanisms to be used and on the level of protection. A state may consequently impose, for example, an obligation on employers to insure or provide for the setting up of a guarantee institution, in respect of which it will lay down detailed funding rules, rather than provide for funding by the public authorities. …

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Retirement Benefits : Employees Less Protected against an Employer's Insolvency
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