DWP proposes overturning ECJ’s ‘Bauer’ ruling

The Department for Work and Pensions (DWP) has written to interested parties about potential plans to scrap a European Court of Justice (ECJ) ruling on pension lifeboats ensuring that members of bust companies' pension schemes do not fall below the poverty line.

In the papers seen by LCP partner and former Pensions Minister, Steve Webb, the DWP is setting up meetings with the title: ‘Removing the effects of the Judgment by Court of Justice of the European Union in the case of Pensions-Sicherungs-Verein VvaG v Gunter Bauer from retained EU law’.

The ‘Bauer’ judgment, passed in December 2019, ruled that lifeboats such as the Pension Protection Fund (PPF) should ensure that ex-employees of insolvent companies do not fall into poverty due to the collapse of their pension scheme.

The DWP wrote to interested parties for discussions on the proposal to scrap the judgment, although it is not yet clear whether the DWP has proposed removing the protections for those potentially affected in the future or if it plans to make retrospective changes.

“More than 400,000 people are already receiving, or set to receive, compensation for pension scheme failures from the PPF, and these arrangements offer valuable protection,” Webb stated.

“But there are limits and gaps in protection which can leave some people at risk of ending up below the poverty line, and the Bauer judgment offers hope to these people.

“If DWP can come up with a more efficient way of achieving the same outcome then this might be acceptable, but it would raise serious issues over pension protection if the ruling was simply scrapped now that the UK has left the EU.”

Currently, workers are entitled to additional support if their household income, including PPF payments, fall below the poverty line following the collapse of their workplace pension scheme.

Webb noted that the judgment created “a headache” for the PPF, as it does not typically collect data on household income as part of their role and no announcement has yet been made on how the judgment was to be implemented or how many people might be affected.

A DWP spokesperson commented: "We are seeking views from a select group of industry representatives to help inform future measures regarding the Bauer judgment, which is likely to only benefit a limited number of people in the UK. Some affected members might be worse off due to the interactions between the judgment, social security benefits and taxation.

“The percentage of pensioners living in poverty has fallen dramatically over recent decades and we are committed to ensuring pensioners are financially supported, including through the new state pension, automatic enrolment, Pension Credit, and the 50 Plus: Choices offer.”

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