National Power faces pounds 200m pension repayment

National Power could be asked to repay more than pounds 200m it removed from its employees' pension scheme in just one of a deluge of claims likely to hit the privatised electricity companies, following a landmark ruling from the Pensions Ombudsman.

A spokesman for the campaign representing pension fund members last night urged all the electricity companies to replace surplus cash taken out of the schemes for the employers' benefit. The total sum involved could approach pounds 1bn.

It also emerged yesterday that most electricity firms had twice taken surplus cash out of their pension funds, which are part of the main Electricity Supply Pension Scheme - once after an actuarial valuation in 1992 and again in 1995.

The claim follows the provisional judgment by Dr Julian Farrand, the ombudsman, in a case brought by two National Grid pensioners. The company had decided to allocate 70 per cent of a pounds 62.3m surplus to itself, some of which went to fund voluntary redundancy and early retirement payments. The other 30 per cent went to enhance pensions benefits.

Dr Farrand said the Grid had misused the pension fund surplus, because the scheme's rules stated the surplus could not be paid to the employer.

The biggest bill could be faced by National Power, which is thought to have used pounds 176m to fund early retirement payouts out of a pounds 303m surplus in 1992. In the second pension fund valuation last year National Power had a surplus of pounds 73.7m, part of which it said at the time would be held in the scheme and later used to fund early retirement costs. National Power declined to comment yesterday.

Of the other companies facing huge bills, Nuclear Electric could have to repay pounds 70m, while PowerGen could have to find pounds 59.4m. In all cases the companies would have to pay interest on top at 8 per cent a year.

Peter Woods, from solicitors Stephens Innocent, which represented the National Grid pensioners, said: "The impact of this will be horrendous for the companies. I don't know how much money these guys have got, but this judgment must have an impact on their balance sheets."

Jack Taylor, a director of the Association of Electricity Supply Pensioners, said trustees of all the funds involved should apply to the High Court to establish whether the judgment applied to them. In any case the companies are certain to take the matter to court if Dr Farrand confirms his findings when he publishes his final judgment in the National Grid case in three weeks.

The campaigners have been fighting to remove variations in benefits offered by different schemes since the industry was split up after privatisation.

Mr Taylor, a former marketing director of the Electricity Council, said any surpluses returned by the companies should be used for this purpose.

He said: "We were all in the same scheme before privatisation but when it later came to sharing out these surpluses some got benefits and others didn't.

"If they put the money back which they've taken out they should use it to restore equity for the pensioners."

A spokesman for the scheme said the ruling was being scrutinised but declined to comment further.

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