The case concerns the Home Décor Pension Scheme, and will decide how a deficit of £40m should impact on each of its 3,500 members.
Imperial Home Décor initially agreed to offer its members money purchase benefits with guarantees and certain underpins. However, the Department for Work and Pensions (DWP) has raised concerns about whether the new arrangement would breach European legal obligations. According to Bridge Trustees’ director Giles Orton, the case hangs on how the law defines ‘money purchase’ benefits, and how these are protected if a pension scheme winds up.
Orton went on to say that whatever the outcome of this case, it would not resolve a “gaping hole” in the Financial Assistance Scheme (FAS).
The FAS currently only protects members with final salary or other defined benefits (DB).
Imperial Home Décor is a hybrid scheme that offers both DB and money purchase benefits, but as the law stands, money purchase members can have their asset share taken away to fund other members’ benefits, while receiving no FAS compensation.
Orton said: “The DWP is aware of the problem and it is apparently waiting for the outcome of the Bridge Trustees appeal before deciding on a solution.”
A DWP spokesperson said: “The government’s view is that where a scheme member is promised a particular level of pension benefit, the benefit is not a money purchase benefit and is covered by the full range of pension protection legislation. Therefore, there is no ‘gaping hole’ in the FAS – it protects the defined benefits it is intended to protect.”
