Pensions problem a little bit harder to fix in wake of Omega ruling

Omega Pharma suffered a landmark pensions ruling
Omega Pharma suffered a landmark pensions ruling

Yesterday's Omega Pharma ruling has made the pensions problem that little bit harder to fix. In broad terms, the High Court said that the trustees of the multi-national's Irish employees' defined benefit retirement plan were entitled to seek more than just the statutory minimum when the company attempted to wind it up.

Following on from that, it means that employers who want to close these schemes, which can in some cases impose a solvency-threatening financial burden on a business, could well have to pay more than they, or their advisers, originally thought.

In the Omega case, when the group sought to wind up its defined benefit scheme in 2012, the trustees demanded that it pay €2.23 million into the fund to make good on its liabilities.

The figure was based on an actuarial calculation of what those liabilities should be once staff reached retirement and was more than the statutory minimum funding standard, which is based on the outcome had the scheme been wound up at that time.

READ MORE

The court ruled that the trustees acted reasonably in using the actuarial calculation and in demanding the contribution that they sought, and thus they won the day.

The bad news here is for employers, as this could add to the cost of ditching these schemes. However, it gives pension fund beneficiaries and their trustees a far stronger hand in protecting the cash that they have been saving for their retirement.

All such cases have to be judged on their facts. The powers of the Omega trustees were based on the deed establishing the fund in the first place. These documents differ from company to company. Also, the court made a fair bit of the fact that the employer refused to negotiate.

It is not a safe bet that all such legal actions will be decided the same way and this one may yet be appealed. Nevertheless, trustees and pension advisers are going to be parsing this ruling very carefully.