Hampshire v The Board of the Pension Protection Fund

Article 8 of the Insolvency Directive does not impose a universal requirement that every pension scheme member receive at least 50% of contractual benefits after the employer’s insolvency. The decisions in Robins and others v Secretary of State for Work and Pensions and Hogan and others v Minister for Social and Family Affairs addressed inadequate protection of general categories of members and state liability in damages. They did not determine whether a generally sufficient scheme could impose a cap on benefits for particular classes of member.

Direct effect requires the minimum benefit intended by the Directive to be identifiable with sufficient precision. Where the Directive leaves unresolved whether a cap is permissible, and at what level, it cannot directly confer the claimed benefit or require a conforming construction of national legislation.

The appellant was a member of the T&N Retirement Benefits Scheme (1989), which entered an assessment period after the insolvency of its sponsoring employers. The Board approved a valuation under sections 143 and 144 of the Pensions Act 2004. The appellant’s compensation was calculated under the statutory Pension Protection Fund regime and was affected by the compensation cap.

After unsuccessful reconsideration and Ombudsman proceedings, he appealed to the High Court under section 217 of the Act. The preliminary issues were whether Article 8 of Directive 80/987/EEC was directly effective and, if so, whether it affected the Board’s approval of the valuation.

1. The appellant’s contention that Article 8 required every individual member to receive at least 50% of contractual pension benefits was rejected. The wording of the Directive was imprecise and contemplated considerable latitude for Member States in selecting both the means and level of protection.
2. Robins and others v Secretary of State for Work and Pensions established that a system which could leave substantial categories of members with less than half their benefits failed to provide proper protection. It did not prescribe a precise percentage applicable in every individual case, nor decide that a cap on higher benefits was unlawful per se.
3. Hogan and others v Minister for Social and Family Affairs was concerned with whether Ireland had seriously breached its obligations so as to incur liability in damages. Its references to at least half of accrued benefits did not decide the legality of targeted differential protection or benefit caps.
4. Direct effect requires the minimum content of the EU obligation and the benefit due to the claimant to be sufficiently precise and identifiable, as indicated by Francovich v Italy. That requirement was not met because the permissibility and level of any cap remained unresolved.
5. The national legislation could not be construed to produce a result which the Directive did not clearly require. The second preliminary issue therefore fell away. A reference to the CJEU was refused because the decisions relied on did not establish the appellant’s proposed interpretation with sufficient clarity to support direct enforcement.

The appellant’s challenge to the valuation on the preliminary issues failed. The parties were invited to agree the resulting order.

• High Court (Chancery Division): appeal from a decision of the Pension Protection Fund Ombudsman. The court rejected the appellant’s construction of Article 8 and determined the preliminary issues against him.