EU Court Says UK Pension Safety Net Not Good Enough

January 26, 2007 ( - The European Court of Justice called the protection the UK gives to pensioners whose companies go bust "inadequate," and said that it should have in place necessary assurances if a company goes bankrupt.

The ruling by the EU judges stems from a case brought to the British courts by the unions representing about 800 workers of Allied Steel and Wire, who saw their pensions cut when the company filed for bankruptcy in 2002. The British courts then asked for clarification from the European Court of Justice about aspects of EU law in the case.

The EU court said that the EU rules do not guarantee full pensions in such cases, but the “level of protection of those rights such as that afforded by the United Kingdom is inadequate.”

British law does not require that the workers get the pension benefits they were entitled to, with two of them receiving only 20% and 49%, respectively of those benefits. The EU stopped short of requiring that full pension benefits be paid, but did say that providing half of the benefits “cannot be considered to fall within the definition of the word ‘protect’ used in the directive.”

The European Court of Justice remanded the case back to the British court to decide whether the government should cover the shortfall in the Allied Steel and Wire case.