Grid pensioners to launch new court challenge

The electricity industry is facing another round of complaints to the Pensions Ombudsman over the way companies have used more than pounds 1bn in pension fund surpluses to help finance redundancy programmes. The challenge will come despite last week's High Court setback for pensioners of National Grid and National Power.

Solicitors acting for two National Grid pensioners yesterday warned that the court ruling, by Mr Justice Robert Walker, opened the way for a wave of new complaints to the ombudsman, Dr Julian Farrand. The pensioners, David Laws and Reg Mayes, are likely to make the new complaint if trustees running the Grid's pension fund fail to fund an appeal against the High Court judgment.

The landmark case came after Dr Farrand ordered the Grid to pay back pounds 46m to its pension fund, which formed part of a surplus identified in 1992 and was used to help pay for redundancies. National Power, which would have had to pay back about pounds 250m, joined the legal action. The judge ruled last week that the ombudsman had been wrong to side with the pensioners.

Most electricity companies had used surpluses from the umbrella scheme, the Electricity Supply Pension Scheme, in the same way after actuarial valuations in 1992 and 1995 and would have had to pay back more than pounds 1bn had the pensioners won their court case.

But it has emerged that in his ruling Mr Justice Walker raised the issue of whether the actuaries appointed to value the pension fund should have been more critical of the company's initial decision to allocate itself 70 per cent of the surplus. Only 30 per cent was given to pensioners in enhanced benefits.

The Grid's actuary, Bacon & Woodrow, signed off the Grid's move in May 1993, but pointed out that its legal responsibility was only to determine that the allocation was "reasonable", because it did not exceed the value of the surplus itself. In the document Bacon & Woodrow said it had not commented on the wider issue of whether the allocation was fair.

The judge's written decision said it was "well within the experience of those actuaries who engage in pensions work" to make a judgement on the question of the fairness. During the hearings it emerged that the trustees of the Grid scheme had wanted a 50-50 division of the surplus but had been overruled by the company's board.

Peter Woods, the pensioners' solicitor, said a complaint would be made to the ombudsman should the trustees and the Grid oppose funding his clients' appeal. "Our view is that the actuary's role needs to be reviewed by the ombudsman."