Today the ECJ published its anxiously-awaited judgment in Case C-278/05 Carol Marilyn Robins and Others v Secretary of State for Work and Pensions. A summary is contained in a press release [PDF]. It is a mixed blessing for both sides, and may indeed turn out to be rather an empty victory for the ASW pensioners.

Ms Robins and 835 other claimants are former employees of Allied Steel and Wire (ASW) Limited, which went into liquidation in April 2003. They were members of final-salary pension schemes funded by ASW. The schemes were terminated in July 2002 and are in the process of being wound up. According to actuarial valuations, there will be insufficient assets to cover all the benefits of all members, and the benefits of non-pensioners will therefore be reduced.

The judgment mentions two of the claimants will receive only 20% and 49% respectively of those benefits and says that a system of "protection" which results in members receiving less than half their benefits (as happened to 35,000 UK pension scheme members in 2004 alone) cannot be called "protection". Thus the Court agreed with the claimants that their benefits had not been adequately protected as required by the 1980 Insolvency Directive (80/987/EEC)*, introduced in 1983, and so the UK legislation in force at the time of the ASW insolvency was incompatible with EC law. The introduction of the FAS does not change its conclusion. The Court added, however - and in this crucial respect did not accept the Advocate General's opinion - that the directive did not require a guarantee of full protection in the event of insolvency. This relieves pension schemes of fears that PPF levies might rise by many hundred percent to cover an increase of benefits from 90% to 100%, with no cap either.

* a directive on the protection of workers in the event of the employer's insolvency. It requires the Member States to ensure that the necessary measures are taken to protect the interests of employees and former employees in the event of the employer's insolvency, in respect of rights conferring on them immediate or prospective entitlement to old-age benefits under supplementary occupational pension schemes.

However, this is not the whole story. The UK High Court had referred two other questions to the ECJ:

• are the Member States required to fund themselves the rights to old-age benefits and if so to fund them in full? and
• what is the liability of the Member State in the case of incorrect transposition of the directive?

The court's decision on these two was favourable to the UK Government.

On the first, it found that the directive does not oblige the Member States themselves to fund the rights to old-age benefits. It leaves the Member States some latitude as to the means to be adopted to ensure protection. A Member State may therefore 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 the detailed rules for funding, rather than provide for funding by the public authorities. Furthermore, the directive gives the Member States, in relation to the level of protection, considerable latitude which (as noted above) excludes an obligation to guarantee in full. By implication, anything above 50% might suffice.