Personal Finance: A long road to justice

No one could blame Frank Wheeler if he chose to rest on his laurels. After battling for 13 years almost single handed, the 73-year-old former bus driver has won back pounds 356m from the Government (pounds 165m plus interest) which was taken from the National Bus Company's pension fund when it was privatised in the Eighties.

With many pension funds in the past decade being wound up on privatisation, companies have been falling over themselves to get a share of the spoils. While Mr Wheeler was trying to win back the bus drivers' money, David Law and Reg Mayes, were doing the same for the National Grid pensioners after their pension surplus was taken by the company to make redundancy payments in the early Nineties. More recently, British Airways has begun proceedings to merge two pension funds, effectively using the surplus from the successful one to enable it to suspend contributions to the one in deficit.

A surplus happens when a pension fund is invested so successfully that there is more money left in the fund than is needed to meet employees' pension needs. The question is who owns the surplus?

The surprising answer is: it depends. The issue of what happens to surpluses is laid out in the rules governing the pension fund. The National Bus Company rules originally said that, in the event of the company being wound up, the surplus should go to the pensioners. But the trustees changed the rules in secret so that when the government sold the company in 1989, it pocketed a surplus of pounds 168m.

Mr Wheeler spent the next seven years trying to find out exactly why this was allowed to happen. "There was more than a slight unwillingness to give me the information," he says.

He achieved a breakthrough when he took the case to Julian Farrand, the Pensions Ombudsman. Although Dr Farrand ruled in favour of the bus drivers in 1996, the government refused to pay up immediately and made plans to take the matter to court. When Labour came to power in 1997, it initially prevaricated before eventually agreeing to pay back the money with interest. That will now be divided between the 40,000 members.

The recent British Airways case is more complicated, but the principle is the same. BA's Airways Pension Scheme (APS) was discontinued in 1984 when the company introduced the New Airways Pension Scheme (Naps). While APS has a large surplus, Naps has a deficit. BA plans to merge the two schemes, giving a chunk of the resulting surplus to APS pensioners and a smaller chunk to Naps pensioners. The pounds 90m left over would enable it to take a contributions holiday. "They can't take the money out of the scheme," says George Bell, chairman of the Association of BA Pensioners, "so they would have to take it in reduced contributions. It's like moving it from one pocket to another."

APS also has an investment reserve of pounds 562m. The second part of BA's proposal is to release this so it can take pounds 281m in the form of a contributions holiday while the pensioners, who would now include the Naps members as well as the APS members, also get pounds 281m.

The APS trustees must ballot the fund's active members (those not yet drawing a pension) over a merger, but they need not act on the result. Mr Bell believes the trustees will go ahead with a plan to refer the issue to the High Court, but argues that a ballot majority against a merger will weigh heavily with a judge. "It's going to take a brave judge to say `the trustees are right and we're going to ignore you lot'."

But what seems unreasonable to the lay person does not always appear so to a judge. In the case brought by Reg Mayes and David Law against the National Grid, Dr Farrand ruled that the company should pay back a pounds 62m surplus. But in 1997 a judge, Mr Justice Robert Walker, argued that the Grid's action in removing the surplus was "reasonable and proper". That ruling was itself overturned on appeal this year. Now the pensioners have to wait for the National Grid's appeal, due in December.

Mr Mayes, 76, said: "I'd have thought it [the company] was doing its commercial interest no good at all. If you get beaten by two amateurs, what does it say for the executive staff? But they're so full of their own importance they think they can do what they like."

Meanwhile, Mr Wheeler has one last battle. The judge in his case recommended that he be paid pounds 5,000 to cover expenses - which, he feels, barely compensates for 13 years of extraordinary persistence. He now plans to fight for a more realistic offer. It's difficult to deny that he deserves it.

HOW TO PROTECT YOUR SURPLUS

GET A COPY of the rules governing the pension scheme in your company. It will show you what your employer is entitled to do.

See the pensioners' association if there is one.

Contact your union but remember that this is not certain to succeed. Mr Wheeler's union refused to get involved until 1996 and Mr Mayes' union still does not support him.

If the union fails to help, contact colleagues. There is strength in numbers.

Find a good solicitor.

Finally, take your case to the Pensions Ombudsman. He has a good record of supporting the rights of pensioners against big companies.