Appeal Court beckons power pensioners in wake of ruling

Lawyers acting for National Power and National Grid pensioners may appeal after last week's High Court ruling that the two privatised electricity companies were right to use pension fund surpluses for redundancy payments.

The ruling by Judge Robert Walker, followed an appeal by National Grid against a decision by the pensions ombudsman

Julian Farrand that it should return £43m which it had taken from its pension scheme in 1993 to fund earlier redundancy payments.

National Power, which had used £300m of its pension surplus on redundancies in 1993 and 1996, was seeking clarification after Farrand's decision.

Lovell White Durrant litigation partner Angela Dimsdale Gill, who was acting for National Power pensioners with Anthony Grabiner QC, said the decision “flies in the face” of the new Pensions Act of 1995, which came into force earlier this year, and which no longer allows an employer alone to decide what to do with a pensions surplus. She called on National Power and the scheme trustees to meet the legal costs for an appeal.

The pensioner complainants against National Grid, represented by partner Peter Woods of Stephens Innocent, have already been granted leave to appeal. Woods said he would be appealing subject to being allowed funding from the Grid pensions scheme. He had brought the original complaint to pensions ombudsman Farrand on a pro bono basis.

Woods was surprised by the judgment. He said that it went against “what the ombudsman and the courts have been saying in the past”. Previous rulings have gone against employers paying themselves out of pension surpluses.

Linklaters & Paines partner John Turnbull, who acted for National Power with Nicholas Warren QC, said: “National Power contributed two thirds of the money to the fund, employees contribute a third. When there was a surplus in the fund, National Power gave two thirds back to itself and one third back to the employees. What could be fairer than that?”

National Grid was represented by Eversheds' partner Harold Lewis, Dibb Lupton Alsop and Robert Ham QC advised National Grid trustees and Biddle & Co with Jules Sher QC advised the trustees of National Power.

Taylor Joynson Garrett partner Christopher Belk said he thought the latest decision would not help his case. He has just issued a writ (May 29) on behalf of National Bus Company pensioners, suing the Department of Transport for the recovery of £101m that it took from the company's pension scheme on privatisation.